Sony debt rating lowered near junk

Moody's drops long-term bond rating to lowest investment-grade class; TV losses and declining game sales cited

Sony's quarterly report last week showed some signs of improvement for the company, but that turnaround isn't happening fast enough for some. Moody's Investors Service today downgraded its issuer and long-term senior unsecured bond rating of Sony from Baa2 to Baa3, its lowest investment-grade rating.

Moody's explained its reasons for pushing Sony's rating to the brink of junk status, pointing to "an increasingly rapid deterioration in demand in the digital AV market." The flat-panel TV market has largely matured, the service said, and the explosive growth of smartphones is cannibalizing demand for Sony products like cameras and the PlayStation Vita.

The service noted that operating profits from Sony's digital imaging and games offerings were down 60 percent for the first half of the fiscal year, and it only expects that decline to worsen. Likewise, Sony is expected to continue losing money on TVs in light of stiff competition and weak sales expected for the coming year.

"The continued negative ratings outlook reflects Moody's view that without robust restructuring in the coming 12-18 months, Sony's non-financial services businesses will at best achieve roughly break-even, and are also at risk of remaining unprofitable," the investment service said.

This is the second downgrade in a month for Sony's long-term bond rating, and the third this year. Moody's kicked it from A3 to Baa1 in January, and then to Baa2 just last month.

More stories

PlayStation's Q1 sales rise to $5.6bn but operating income down 40%

2021 performance suffers in comparison to The Last of Us Part 2 launch and pandemic spike in PS4 sales

By James Batchelor

PlayStation revenues near $25bn as PS5 ships 7.8m in five months

Sony's gaming segment drives full-year revenues to $81.7 billion

By James Batchelor

Latest comments (9)

This is what worries me most about Sony. If they can't turn things around quickly and the debt bites- it could really be game over for them. Unlike Nintendo Microsoft and Apple Sony don't have a big stockpile of cash and have a large amount of debt. We all know how damaging this can be in today's financial environment.
0Sign inorRegisterto rate and reply
Sony seems to be in the sights of a number of Asian Tiger corporations – the future could be a LG acquisition?

But from a gaming perspective the interest is that certain board investors are using the promotion of the recent entertainment division chief executive to curtail his ambitions to release new hardware just yet. Literally hold back the advance plans of Gen-8 (PS4) to the depths of Q-3 2013 hoping that by that time investment or acquisition will remove the burden from their investment.

We could see Nintendo win by default in 2013, as MS suffers from problems with Win / tablet / phone and online issues and has to restructure to address their whole premise regarding owning the living room; and Sony just crumbles under debt and investment problems. That would kind of hand the Gen-8/9 to the PC sector and would decimate the traditional consumer game scene.

The loss of Sony’s marketing infrastructure has already left a trail of devastation with the media that depended on their spoon feeding and investment (paid for advertorials) – what would the loss of the Sony development infrastructure and distribution network mean, (just look what closing down the Liverpool studio did in the UK trade).
0Sign inorRegisterto rate and reply
Bruce Everiss Marketing Consultant 9 years ago
Here is some research I found:

Apple vs Sony

Apple $631b market cap - grown since 2002 126x

Sony $12b market cap - shrank since 2002 to 1/3rd value

Apple now 52 x bigger than Sony, in 2002 Sony was seven times bigger than Apple
0Sign inorRegisterto rate and reply
Show all comments (9)
Fran Mulhern , Recruit3D9 years ago
Well, we all know how accurate ratings agencies are.

Sony aren't going anywhere.
0Sign inorRegisterto rate and reply
Justin Biddle Software Developer 9 years ago
And there in lies the problem.
0Sign inorRegisterto rate and reply
Fran Mulhern , Recruit3D9 years ago
1Sign inorRegisterto rate and reply
The thing to figure is how firewalled are Sony development studios vs the entire entertainment/manufacturing division....
0Sign inorRegisterto rate and reply
John Donnelly Quality Assurance 9 years ago
Actually Fran this is a problem for Sony that could cause them major problems.

Most investment banks wont trade securities with junk status this drives down the share price and lowers the value of the company. This in turn makes it more expensive to borrow money which means they have to pay back more or take on a larger debt profile which will impact their books again lowering the share price, investor confidence and again this snowballs in to a major problem for the company.

Rating agencies are not perfect but their ratings are taking seriously.
0Sign inorRegisterto rate and reply
Tony Johns9 years ago
Sad times for SONY.

Considering they were the only company to allow Multi Region consoles and handhelds in the current market of this Generation (besides from the earlier versions of the Nintendo DS) I would see the way that SONY have fallen to be a sad time for the import gamer market.

If SONY falls on bankruptcy like SEGA almost did in the demise of the Dreamcast, then it would mean that the opportunity for PAL gamers like me to get games from Japan as well as from America will deminish and I would have to rely on boot disks and buying the same console or handheld but from a different region just to play games that don't come out into PAL region.

Sadly with online downloads of games, those would be region locked too because looking at the way that Microsoft, Nintendo and SONY make their digital market places different from region to region, it makes it all the more harder for gamers in the know to be committed and more likely to take the download at pirate sites more possible.

Seriously either SONY goes down and we all get screwed or Microsoft and Nintendo need to abandon Region Locking practices in order to give us all a fair go.
0Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.