Fitch, one of the financial institutions that decides these things, has declared that Sony’s credit is “junk”. They’ve lowered the Japanese company’s rating from an already pretty poor BB- to BBB-. That’s three rungs down the ladder, apparently.
Basically this means that one institution – although the others are likely to follow suit – says that you’d be a nutter to invest in Sony right now. This rating, also applied to Panasonic in the same report, implies that without dramatic restructuring of business, Sony is at risk of defaulting on its loans in the long-term. It should be noted that, although their credit rating isn’t much to be proud of, they do have a bit of a cash cushion saved up. Sony’s stock average has dropped 72 per cent over the past year.
The problems for Sony, who has posted seven consecutive quarterly losses, are mostly in their TV division where they’re failing to compete with the likes of Samsung and LG. The report notes that the image sensing arm of Sony’s business (cameras) is still quite strong and we know that the PlayStation department is vibrant and heading for a new generation which is likely to lead to long term profits, even though it is probably costing a lot for the company initially.
It appears that the advice to Sony is to burn the TV department and focus on the things they’re still good at, rather than pushing more effort into a sector they’re falling so far behind in. The report is behind the silly paywall at the FT but a kind soul on GAF has transcribed bits of it.
xdarkmagician
Well, it’s their bad decisions that have got Sony here so I’m fairly confident that whatever decision Sony makes to correct this will also be a bad decision. The TV market is dominated by lesser known names, like Vizio and LG because their TV cost half the price. Sony thinks like they’re the freaking Ferrari of electronics. They don’t understand todays consumers care more about price then brand loyalty and unless one product is vastly superior, they’ll chose price over brand every time. Sony doesn’t need to stop making TVs, they just need to reduce their costs and sell TVs cheaper.
But at the end of the day this is good, it’s capitalism at work. Companies who make poor decisions don’t get to do poor business anymore, so either Sony will hire a CEO who knows WTF they’re doing and Sony will see profit once again or they’ll fail. Having a credit rating reduce should be a warning to change. If Sony fails they only have themselves to blame.