According to a report provided by Reuters, financial firm Standard & Poor’s (S&P) has lowered Sony long-term credit and debt ratings from ‘A-‘ to ‘BBB+’. The firm also removed the ratings from CreditWatch, where it dropped them in November of 2011.
“The outlook on the long-term corporate credit rating is negative. We base the downgrade on our view that severe circumstances in Sony's mainstay electronics businesses make a strong recovery in earnings unlikely. We base the negative outlook on the long-term corporate credit rating on our expectation that we could lower the ratings further if we see no meaningful sign of a recovery in Sony's earnings within six to 12 months. We affirmed the 'A-2' short-term corporate credit rating on the company,” said S&P in a statement.
Sony recently released its earnings results for the third fiscal quarter, noting at the time that it expected a net loss of $2.89 billion for the full fiscal year. S&P doesn’t see a quick recovery for the company, leading to the downgrade in ratings.
“Standard & Poor's believes the major reason for the extended losses is 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,” read the report.
“Circumstances are so severe that Standard & Poor's believes 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.”
“The outlook on the long-term corporate credit rating on Sony is negative, reflecting our view that we could lower the ratings further if we see no meaningful sign of a recovery in earnings within six to 12 months. We expect strong price erosion and a fall in demand may delay a recovery in earnings in the company's TV segment and lead to further expenses in restructuring.”
More bad news for Sony, but with new President Kazou Hirai at the helm, perhaps things can be turned around quicker.
