Company's credit rating goes from A- to BBB+
Credit ratings agency Standard and Poor’s downgraded struggling Sony Corp.’s credit on doubts the giant company can nurse its ailing electronics businesses back to health anytime soon.
“Massive pressure on the prices of Sony’s key products, such as flat-panel TVs and mobile handsets, is likely to continue, and the company’s position in the global market is under strong pressure amid severe competition from Korean manufacturers and emerging Chinese companies,” S&P said in a statement.
The shift from an A- to a BBB+ credit rating puts Sony two levels above junk status and follows a downgrade by Moody’s Investor Services last month. S&P said it may drop Sony’s rating even further if it doesn’t see a “meaningful” sign of recovery in the coming six to 12 months.
The move comes days after the company announced a new CEO and forecast $2.9 billion in net losses for the financial year, its fourth consecutive year in the red. S&P cited “Sony’s strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices, and its high-cost structure compared with overseas competitors.”
“It will be difficult for Sony to return its TV business to profitability even in fiscal 2013. Therefore, we see a low likelihood of a strong recovery in Sony’s earnings in the next two years or so.”
Sony prexy and CEO Howard Stringer is stepping down to make way for Kazuo Hirai, who turned around Sony’s game biz and has since taken over management of its core electronics division.
Hirai is aiming to slash TV biz losses in half in the coming 2012 fiscal year and return to profitability by the end of March 2014 but S&P said that would be nearly impossible to do.