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“The Outlook is Negative”: Standard & Poor Downgrades Sony’s Financial Rating, Warns of Further Action

February 8, 2012 Written by Sebastian Moss

With Sony losing money for four straight years in a row – over $2 billion in the last quarter alone – credit rating agency Standard and Poor has downgraded the company, citing “a massive erosion of prices, falling demand, and harsh competition” across Sony’s main businesses.

Standard & Poor’s Ratings Services today lowered its long-term corporate credit and senior unsecured debt ratings on Sony from A- to BBB+. BBB+ means that the agency – which is highly respected by investors – has downgraded its view of the company and its recommendation on whether people should invest in Sony, something which is sure to affect the Sony’s share price adversely.

S&P commented that the “outlook on the long-term corporate credit rating is negative”, saying that the “severe circumstances in Sony’s mainstay electronics businesses make a strong recovery in earnings unlikely”. The group warned that they could lower the rating further should they see no meaningful sign of a recovery within 6-12 months.

One of the main reasons for Sony’s failure is given to be their TV business, which has made repeated losses since fiscal 2004 totaling in the tens of billions. S&P stated that even if Sony shifted its focus from market share to profitability, they would still probably not make money in the industry until fiscal 2013.

Sony’s profitability is noted as being “significantly weaker than that of its global industry peers”, but did note that their will (probably) be no repeat of one-off expenses due to floods in Thailand and impairment losses on stockholdings, which should help the company.

To even think about upgrading the company, S&P would have to see Sony stabilize their core business earnings and show stronger prospects for financial improvement – something they see as unlikely to happen.

The news is set to make Kaz Hirai’s job as the upcoming CEO and President of Sony even harder, as he struggles to return profitability to what was once the king of the tech industry.