Moody’s Investors Service has cut Sony’s credit rating to junk after the company’s continued financial struggles.
The Japanese electronic giant’s rating has been lowered from Baa3 to Ba1, one level below investment grade. This means that Sony will likely lose some potential investors, and it may also increase the cost of borrowing money from banks.
Moody’s said in a statement:
While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilize its overall profitability and, in the near term, to achieve a profile that Moody’s views as consistent with an investment grade rating.
Of primary concern are the challenges facing the company’s TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence.
Sony’s profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses – such as TVs, mobile, digital cameras and personal computers – to continue to face significant downward earnings pressure.
However Moody’s did realize that there’s a good chance of an increase in profitability for Sony’s games business, but sadly “not to the extent seen with the profitability level in 2010.”
Do you worry for Sony as a whole, and the impacts their poor TV sector could have on their games division? Share your thoughts in the comments below.