Ratings agency Moody’s has cut the credit rating of electronics giant Sony to ‘Junk’ status. The reason, says Moody’s, is that it expects earnings from Sony’s core electronics businesses to continue to face “significant” downward pressure and suffer “intense” global competition especially in its TV and computer divisions.
Sony has already trimmed (in October 2013) its own net profit expectations for this current trading period by 40 per cent (from Y50 billion to Y30 billion, or just $290 million).
“The rating actions reflect Moody’s view that, 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 stabilise its overall profitability,” stated Moody’s.
Moody’s praised Sony’s restructuring efforts, but pulled no punches, adding: “The primary reason is intense competition and the shrinkage in demand, the result in turn of cannibalisation caused by the rapid penetration of smart-phones.”