Sony Debt Rating Gets Downgraded to "Junk" Status

[Alex Co]

Sony Debt Rating Gets Downgraded to "Junk" Status

Ratings firm Moody states that Sony Corp.'s corporate debt is no longer "investment grade."

While Sony has been winning the next-gen console war [http://www.escapistmagazine.com/news/view/131219-PS4-Beats-Xbox-One-as-UKs-Best-Selling-Console-in-2013] against Microsoft, the company's other divisions might not be in the same rosy state. Credit ratings agency Moody Investors Service has now downgraded Sony Corp.'s debt rating to "junk" status.


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 ratings has been lowered from Baa3 to Ba1, which is one level below investment grade. For reference a junk credit rating means potential investors will be discouraged, and it might also increase the cost of borrowing money for the electronics giant. There is a sliver of bright light for Sony, though, as Moody did acknowledge the chance of an increase in profitability for the company's video game division, but adds, "not to the extent seen with the profitability level in 2010."

Sony Corp. is now led by former Sony Computer Entertainment boss Kaz Hirai, who took over for former president and CEO Sir Howard Stringer in 2012.

Source: The Hollywood Reporter [http://www.gamesindustry.biz/articles/2014-01-27-sonys-credit-rating-cut-to-junk]

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[Casual Shinji]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

Anyway, it's no surprise Sony is in a bit of hot water. Samsung seems to be snatching their market right out from under them.

 

[gigastar]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

I think its industry regulators. Or at least people approved of by industry regulators.

 

[Casual Shinji]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

I think its industry regulators. Or at least people approved of by industry regulators.

Yeah, but it's not like they're government officials or something, right? I mean, they themselves are also a corporation/business.

 

[MrBaskerville]

I hope they step up their game someday, cause i used to like their products. Back in the day they made some high quality phones and headsets, but these days Samsung seems to be a lot better while Sonys phones and TVs (atleast the low end) are kinda shit :/.

 

[O maestre]

It's what they get for cutting corners. Japanese products use to mean excellent build quality and functional design.
They still have the design part barely but now the quality has taken a tremendous hit. The VAIO line and the last ps3 models are the greatest perpetrators. Weak physical build, bloatware and hardware downgrades. At premeium pricing.

While it's true that Acer gets away with it nobody expects them to do anything different. Sony on the other hand has a name and reputation that they are failing to live up to. The only positive thing I can say about their consumer products are the xperia tablet series, despite the bloatware, and their compatibility software which is great. When you get a Sony device odds are it can talk to everything in your house. Unfortunately for them Samsung is also excelling at that and beating them on quality and gimmicks unfortunately for us.

I think they need to turn back the clock and put faith into not only marketing but also producing high quality "made in Japan" products.

 

[SonOfVoorhees]

When i said to people that Sony couldn't risk producing a console that's different due to their debt issues, people didn't believe me. Which is why the PS4 is nothing special, more of a PS3.5, they cant risk alienating consumers. An it was a god send when MS screwed up in their unveiling as Sony could then just spend their unveiling just saying that they are doing the opposite of MS. Before people complain, thats good business when your in competition. Problem with Sony is they still try and sell based on brand, so their stuff is always more expensive as everyone else, though everyone does better quality.

I do hope Sony get through this money issue, would hate for the PS brand to disappear, the PS1 was what got me into console gaming.

 

[Strazdas]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

no one. that was a big problem during the crysis. such firms, including Moody named here, rated banks that went up as AAA+++ - safest investment rating possible even after it was clear it wasnt which caused more knowledgable investors actually loose money over it. however since their rating is only advisatory and not somehow binding that means they got no responsibility for any of their ratings, meanwhile people lost a lot of money. they rated the securities of home loans as high security when it clearly wasnt for anyone that knew what it was, which made public loose a lot of belief in these institutions. however to note here is that they are always overoptimistic, so if moody went so far as to lower the rating of sony there is reason to worry. when USA was at the brink of having a debt recall that would have wrecked world economy it was still rated as very safe investment (though they did nock it down a notch during the crysis, too late of course)

 

[Saltyk]

There's one thing bugging me with this. Why did they skip a grade? Shouldn't this have been more gradual?

Beyond that, I'm happy with my PS4 and really hope they turn around their other divisions. Would hate to lose the Playstation Brand. It's been an amazing bunch of systems. Even the "failed" system that was the PS3 was an amazing machine.

 

[Mortuorum]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

They are regulated by the U.S Securities and Exchange Commission (SEC). Moody's produces commercial credit ratings that are used by millions of businesses and private investors. If their ratings aren't accurate, they will lose business to S&P, Fitch and other rivals, so it's in their best interest to provide the most accurate ratings they can.

The commercial credit ratings agencies aren't perfect; in fact, they were a contributor to the recent financial crisis due to their incorrect ratings of mortgage-backed securities as creditworthy. That said, I still trust their results more than I would if they were a US government agency. If they say that Sony is in a position where they may not be able to make good on their debts, I tend to believe them. If I were an investor, I would think twice before investing in Sony or at least insist on an increased return on my investment.

 

[J Tyran]

The only positive thing I can say about their consumer products are the xperia tablet series, despite the bloatware, and their compatibility software which is great. When you get a Sony device odds are it can talk to everything in your house. Unfortunately for them Samsung is also excelling at that and beating them on quality and gimmicks unfortunately for us.

The Sony Xperia Tablet Z is definitely among the best on the market, it sits up alongside the market leaders and the same can be said for the phones which make into many tech sites top ten phones, Unfortunately many of Sonys other products cannot say the same. Both Samsung and LG are kicking their arses in the mid range TV bracket, apart from the Playstation stuff they didn't have much to show us at CES 2014 either.

You would have expected them to come out swinging but all they really had was a "me too" smartwatch and a new high end portable media player (of all things considering they are dying) that's supposedly good enough for audiophiles. The XBR-X950B TV might as well have been a demonstration for "this is the kind of TV and the kind of hardware people will be buying in five years time" rather than an actual product announcement, a niche product with niche features (albeit good ones) that will be swimming in a very small pond with all the other high price and small sales volume panels. Its quite a good TV in its own rights but Panasonic, LG, Samsung and Sharp also unveiled some nice high end sets, TVs with beyond HD resolutions are premature with almost zero supporting media. Cable and satellite TV barely supports 1080p at the moment, not every channel is available in HD and not all the programs on them are native 1080p. They often SD recordings upscaled and some providers cable boxes only support 1080i. Physical media isn't really sorted out yet and either way we will need new players to play it because of the encoding most existing drives will be not be able to handle (if they go BD which seems likely), streaming services are not able to answer the 4/8K call either.

With loads of people still having to suffer datacaps so even for people that have the 15Mbps connection speed to actually watch a 4K movie they will not be watching much 4K content, thats if they even offer it in the first place. With 3D at home dying people might be distrustful upgrading again when they where forced to pay for 3D TV (thats all you could get if you wanted a midrange and above TV) that was pretty crap in most cases and is already dying, full HD took its time to grow to the stunted and limited extent that it has and distrust might slow the growth even more. TV tech doesn't grow and evolve at the same speed mobile tech does, people will happily drop £500 on a phone/tablet every 12-24 months but the minimum expectation is that a £500-1500 TV should last them at least five years

Sony should be doing the same for the TV market as they are doing in the tablet market, lukewarm mid range sets are helping to sink them.

 

[havoc33]

I actually bought a Sony VAIO Fit laptop last summer, and I'm very, very happy with it so far. Looks and feels great, and I have no performance issues with it whenever I DJ, which disappointed me greatly with my previous Dell laptop.

It might be a coincidence, but it would seem whenever I buy a Sony product I do end being a very happy customer. A friend of mine speaks very highly of one of the recent Xperia phones too.

I for one will keep supporting Sony, as their track record with me is spotless, and I'd hate to see them go.

 

[matrix3509]

Now I'm not saying Sony's debt rating isn't complete shit, but this is the same Moody's that was giving credit default swaps the best available ratings back in '08. Anyone who trusts these agencies to give trustworthy info more than their own research and brain is fucking idiotic.

 

[Pink Apocalypse]

My boyfriend bought a Dell laptop, and six months later it was 'completely bricked beyond the expense worth to repair', according to two different repair technicians, through no fault of his own.

I bought a VAIO a little over 7 years ago, and it still runs like the day I bought it. I'm typing on it right now.

 

[Crimsonmonkeywar]

Now is the time for gamble investments.

 

[Baresark]

That is a hit. I have to be honest: On a moral basis, I'm against these rating firms. They rate some things far too high, and ruin other companies by giving them downgrades, and it's their opinion. The general consensus is that these firms are there to give investors something to work off of. But they user their power to literally make or break companies, which shouldn't be allowed.

 

[Fearzone]

Things have been looking bad for Sony for awhile, I was expecting this thing to happen after the Vita... maybe it did I don't know. But also the PS4 is looking to be a solid performer. As long as nothing stupid happens, I'm not ready to write them off. Who knows I could be wrong.

 

[Therumancer]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

Anyway, it's no surprise Sony is in a bit of hot water. Samsung seems to be snatching their market right out from under them.

Meh, I suspect it's an attempt to pressure Sony into disclosing the extent of it's assets and actual financial status, something which will probably fail.

Sony is like a giant, predatory, spider sitting in the middle of a web. It was the inspiration for a lot of the "Evil Japanacorps" in cyberpunk fiction. Specifically the aspect that it has it's fingers into so many pies and owns so many companies under blinders that it's impossible to determine the extent of it's power and holdings. It's inspired a number of conspiracy theories, which is why you saw an "Orochi Corporation" appearing as a 4th player in "The Secret World", purely as NPCs.

I stay away from a lot of the more elaborate theories, but at the end of the day Sony getting dropped to "junk" status seems almost like a bad joke. Even if Sony HQs was to seemingly go under, it's so bloody huge it would probably just continue operating in the shadows.

Given that Sony presents a comparatively humble outward appearance, seemingly much weaker than many other companies, and even occasionally invokes images of it's "humble start" with two guys starting a rice cooker manufacturing business they planned in the ruins of a bombed out building post-World War II. I'm guessing the ploy is to try and get Sony to divulge assets in order to raise it's ratings and demonstrate why it's apparent debt is no big deal. That said, I doubt it will do that, as it would probably rather collapse and even lose the official use of the "Sony" name than reveal what it actually has and how it's organized.

That's my thoughts at any rate. I'm not a big believer in a lot of the conspiracy theories tying Sony to everything from Japanese intelligence (being a post-war economic weapon), to cults, to being a driving force behind a "New World Order", but I do believe it's secretly one of the most massive business organizations on the planet, perhaps even the biggest, and basically a giant money swallowing, self-perpetuating Godzilla.

 

[Andrew_C]

I can't help but feel a bit dubious about these rating firms. After all, who the hell rates them?

They are regulated by the U.S Securities and Exchange Commission (SEC). Moody's produces commercial credit ratings that are used by millions of businesses and private investors. If their ratings aren't accurate, they will lose business to S&P, Fitch and other rivals, so it's in their best interest to provide the most accurate ratings they can.

The commercial credit ratings agencies aren't perfect; in fact, they were a contributor to the recent financial crisis due to their incorrect ratings of mortgage-backed securities as creditworthy. That said, I still trust their results more than I would if they were a US government agency. If they say that Sony is in a position where they may not be able to make good on their debts, I tend to believe them. If I were an investor, I would think twice before investing in Sony or at least insist on an increased return on my investment.

Actually, while they come under the general remit of the SEC, they are not directly regulated by them. Moody's and S&P (and Fitch) are not regulated directly by anyone and beholden only to themselves. They are effectively a cartel. A cartel that as a result of worldwide financial deregulation since the 1980's is in a rather unique and powerful position, that of being the final authority on who is credit-worthy.

The way they handed out AAA credit ratings to banks they knew were failing and countries without visible means of support played a large role in the Financial Crisis of 2007.

 

[Hero of Lime]

Well I guess Sony has to go third party now. Sure, one of their systems is selling well, but we all know they are doomed. Can't wait to see God of War on Xbox!

In all seriousness, Sony as a whole has been in big trouble outside of the Playstation's operation. Whether or not this is actual trouble for Sony, or a firm manipulating Sony's favorable investment image, there are real problems with the company. I can't see Sony imploding, but a warning via a "downgrade" that investing in the company is a bad idea sounds reasonable to me considering the company's overall performance.