Sony's Credit Rating Drops

The Wooster

King Snap
Jul 15, 2008
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Sony's Credit Rating Drops


Financial services and credit rating agency, Standard & Poor, has lowered Sony's long-term credit and debt rating from A- to a less impressive BBB+.

As one of the so-called "big three" credit rating agencies, S&P's ratings are massively influential. You may recall how late last year, US news agencies were awash with alarmist news of impending financial armageddon. That was due to S&P reducing the nation's credit rating from a nice-shiny AAA to AA+. Thankfully the other two members of the big three didn't follow suit, which, American readers, is why you're reading this in the comfort of your own home, rather than in a shop window as you toast rats over a flaming oil drum. So yes, before you ask, this is kind of a big deal.

"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," read an S&P press release.

This news comes shortly after Sony announced a massive $2.9 billion projected loss for the 2011 fiscal year - which, for those of you who like proper dates that make sense, ends this March. The single-notch downgrade is somewhat mild given Sony's poor performance over the past year, but S&P puts some of the company's financial troubles down to one-off expenses, such as the floods in Thailand which killed nearly 600 people and shut down numerous factories.

While the thus-far poor performance [http://www.escapistmagazine.com/news/view/115688-Sony-Still-Thinks-the-Vita-is-Doing-Well] of the PlayStation Vita probably isn't helping, S&P reckons the real problem is Sony's inability to turn a profit on TV sales.

"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," the press release continues. "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."

The lowered credit rating is just one of many problems newly appointed CEO Kazuo Hirai will have to face. "I thought turning around the PlayStation business was going to be the toughest challenge of my career, but I guess not," he said during one interview. [http://www.escapistmagazine.com/news/view/115672-Kaz-Hirai-Becomes-Sony-CEO-Asks-Holy-Sh-t-Now-What] "It's one issue after another. I feel like 'Holy shit, now what?'"

Source: Reuters [http://www.reuters.com/article/2012/02/08/idUSWLA260120120208] Thanks to Saucycarpdog [http://www.escapistmagazine.com/profiles/view/Saucycarpdog]


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James Raynor

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Sep 3, 2008
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I really wish the school system worked this way. Screw up big time and you get a BBB+ instead of an F.
 

Zen Toombs

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Nov 7, 2011
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Eh, these guys gave the AAA rating to the terrabad practices that got us into this recession. I care not what they think of anyone or anything.
 

Something Amyss

Aswyng and Amyss
Dec 3, 2008
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Zen Toombs said:
Eh, these guys gave the AAA rating to the terrabad practices that got us into this recession. I care not what they think of anyone or anything.
Inclined to agree.

Also, awful business practices only drop you to a B(something). Awesome. Where do I get this sort of deal?
 

Rainboq

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Nov 19, 2009
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While I agree with this decision given Sony's incredible lack of judgment and foresight, I trust S & P about as far as I can throw them, and given their giant bags of money, isn't very far.
 

Braedan

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Sep 14, 2010
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Uhhh, I think some people here are confusing a credit rating for a business review.
 

Quiet Stranger

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Feb 4, 2006
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I just hope Sony gets their act together, I LOVE their TVs (I have a Sony Bravia) and I love my PS3 and I listen to my PSP every night as I go to bed, I really hope they can get their act together.
 

EHKOS

Madness to my Methods
Feb 28, 2010
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Well yeah they can't sell TV's. $100 more for just the brand name is a bit much.
 

Silas13013

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Mar 31, 2011
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Except S&P can go fuck themselves. I've stopped following their advice ever since they gave the US housing market a AAA rating... 6 months before it collapsed causing a worldwide credit shock.
 

DiMono

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Mar 18, 2010
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Considering S&P gave AAA (I think) ratings to junk mortgages in the housing bubble, Sony must be in REAL trouble.
 

Callate

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Dec 5, 2008
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But why is it always S&P? There are other credit rating agencies; S&P just seem to be the ones who are assholes. "Hey, new guy. We were thinking you probably don't have enough problems to deal with right now, so, here y'go."
 

Something Amyss

Aswyng and Amyss
Dec 3, 2008
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Zen Toombs said:
Zachary Amaranth said:
Also, awful business practices only drop you to a B(something). Awesome. Where do I get this sort of deal?
Become a business major. :p
Meh. Too much work.

Callate said:
But why is it always S&P? There are other credit rating agencies; S&P just seem to be the ones who are assholes. "Hey, new guy. We were thinking you probably don't have enough problems to deal with right now, so, here y'go."
That's not entirely true. They're the ones who have gotten the biggest news a couple of times, but they're not the only ones downgrading credit. It's kind of a confirmation bias.

They're one of the "big three." The others do it, too. And have been.

Besides, the US Government and Sony are hardly "new guys."
 

Callate

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Dec 5, 2008
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Zachary Amaranth said:
[That's not entirely true. They're the ones who have gotten the biggest news a couple of times, but they're not the only ones downgrading credit. It's kind of a confirmation bias.

They're one of the "big three." The others do it, too. And have been.

Besides, the US Government and Sony are hardly "new guys."
Well, it's true that Moody's Investor Service also dropped Sony's credit rating, as did Fitch Ratings. But Moody's did so on January 20 ([link]http://www.moodys.com/research/Moodys-downgrades-Sony-to-Baa1-outlook-negative--PR_235349[/link]), and Fitch on December 15 ([link]http://www.businessweek.com/news/2011-12-16/sony-rating-cut-by-fitch-on-losses-from-tvs-acquisitions.html[/link]).

My "new guy" comment was reflecting on the fact that Kazuo Hirai was announced to take over as President and CEO of Sony on February 1, effective April 1 ([link]http://en.wikipedia.org/wiki/Kazuo_Hirai[/link]). S&P is the only one who announced their downgrade after this appointment, and before any decisions Hirai might make could effect Sony's financial outlook.

Also, while S&P may well have reasons for its downgrades of both Sony and the U.S.- I'm sure they do- I also have to look askance on the fact that they quite publicly attempted to use the threat of the downgrade to shape U.S. policy, however ineffectively. I confess my hackles get up when financial institutions, especially ones in such speculative fields as credit, think it's part of their purview to manipulate government policies.

I don't doubt if Fitch Ratings or Moody was in the news more, I'd probably be scrutinizing them more, and quite possibly not brimming with love for them, either. But I stand by my statement that S&P seem to be assholes.
 

DJ_Bunce

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Jan 20, 2010
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I will start buying Sony products again when they pull their finger out and develop a customer service department who will actually provide customer service. Until then, I shall wish them luck from in front of my Xbox.
 

FalloutJack

Bah weep grah nah neep ninny bom
Nov 20, 2008
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Well unfortunately, companies go up and down all the time. I had no idea Sony might have trouble with the television, considering there IS more sunk into production of the Vita. As FOR the Vita, I've got a more appropriate line of music for it.

 

lRookiel

Lord of Infinite Grins
Jun 30, 2011
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First Sony, then EA shall taste the pain..... MOUAHAHAHAHAHAHAHAHA!

(One can only hope)