Sony has had it’s credit rating downgraded to “Junk” by big name agency Fitch Ratings.
Alongside the electronics manufacturer Panasonic, Sony’s credit rating has been moved from BBB- to a rating of BB- and maintained its Outlooks as Negative. Since it’s ratings are below BBB-, the bonds are now known as “junk bonds”. Fitch’s decision to downgrade Sony and Panasonic takes away both companies rating of “investment-grade”.
Whilst Fitch don’t take the decision to downgrade Sony lightly, the agency believes that whilst Sony can recover from their current situation, the road to recovery won’t be an easy nor a quick one. “This wasn’t an easy decision. But their reputations have been hit so much that it’ll take a long while to crawl back.” said Matt Jamieson, Fitch’s Head of corporate research. Sony’s plans unveiled at the beginning of the year announced that the company is restructuring itself in a bit to get the company back onto financial track. They’ve already made plans to lay off 10,000 staff members as the first move in this plan but there’s no guarantee that the restructuring will get any results.
“Fitch believes that the strategic initiatives announced in April 2012 to turn around the company’s electronics business are the right approach, but execution is a risk”.
Whilst Sony’s reputation as the home and entertainment manufacturer slowly disappears, Fitch Ratings believes that Sony’s particular weakness in that area could be saved by the “relatively stable” music and picture divisions. Whilst the PlayStation brand is doing relatively well with PS3 numbers reaching the same as it’s competitor, the Xbox 360, the future of Sony continues to appear bleak.
Sony margins and yearly reports haven’t been good in recent years and Fitch doesn’t think that there will be a difference this year with a prediction that the margins for FYE13/FYE14 will be negative or at the very least, minimal. The “success of its [Sony's] turnaround plan” will shape the future of the company in FYE15.
George Sinclair is an editor for Analog Addiction, the home of the latest news, reviews and previews. You can find George on Twitter and his blog on IGN. Be sure to follow the OFFICIAL Analog Addiction Twitter as well!