Sony debt rating downgraded again

[OriginalHamster]

Credit ratings agency Moody's Investors Service said Monday that Sony Corp.’s corporate debt was no longer investment grade, citing challenges in its consumer electronics business.

It downgraded the debt rating on the consumer electronics and entertainment conglomerate, led by CEO Kaz Hirai, to so-called "junk" status. Better debt ratings make borrowing cheaper for companies.

"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."

But Moody's was more positive on the profitability outlook for Sony's entertainment units.

"The four segments of Devices, Imaging Products & Solutions, Music and Pictures are expected to remain profitable, but not at levels, which in aggregate can support an investment grade rating for the overall corporation, the Music and Pictures segments are expected to remain profitable -- after an expected one quarter seasonal loss in Pictures -- and supportive of the company's cash flow and profitability."

It added that Sony’s PlayStation 4 console would help earnings at its video games segment, but predited that profits would come in below those reported in previous years.

The downgrade concludes a debt ratings review that Moody's had initiated in November.

Basically Sony went from Baa3 / Prime-3 (Investment Grade) to Ba1 / Not Prime (Speculative Grade).

Source

 

[Tom Bombadildo]

...ok?

Pretty sure financial "news" isn't considered appropriate for USN, it's more General Off-Topic stuff.

 

[Arras]

I'm pretty sure I've seen this before, or something about some company being degraded to junk status. And yeah I don't think it really matters for anyone here unless they planned on buying Sony stocks.

 

[Hop2089]

Sony better not go into bankruptcy because if Sony goes under this generation, mobile will take over destroying the Japanese gaming industry as we know it in a few months, Nintendo will be fine but only financially however they will wane eventually in Japan and will be forced to operate mostly in the West to stay profitable.

 

[Cortador]

Will this make Sony jump out of the gaming business? Nope
As it stands, will it affect PS4's popularity with the gaming crowd? Nope

I fail to see the point of posting this in the USN like the user above mentioned. Would be better suited for -offtopic.

 

[FAST6191]

Sony better not go into bankruptcy because if Sony goes under this generation, mobile will take over destroying the Japanese gaming industry as we know it in a few months, Nintendo will be fine but only financially however they will wane eventually in Japan and will be forced to operate mostly in the West to stay profitable.

You say this a lot, indeed I dare say if I want back through similar threads I might get almost the same wording, but Japan seems to do mobile quite well and I am not seeing it as a downside.

Anyway thanks for the news, I ended up reading one of the last articles about their credit rating not being great a few weeks back for some reason and wondered what happened since. This quite interesting though, I shall have to see what terms these hypothetical debts are to be over. Of course if it is 10 years or more I can see it.

 

[McHaggis]

"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."

I can understand this. 10 years ago, Sony seemed to have the edge in both design and quality for TVs, laptops and home PCs. They could get away with charging a premium for those products because people would pay it. I don't think this holds true any more. LG and Samsung TVs are easily equal or better in style and quality, and offer much better value for money. Acer, Dell, HP and many other companies can beat Sony laptops and PCs in terms of specifications at a lower price and they all have great looking, slimline and lightweight (for laptops) products.

I'm typing from a Sony laptop right now, which is my third iteration of the SZ and Z series, and these were among the most stylish laptops you could find when the first generation launched. I have a Sony TV in my living room. However, I will not be choosing Sony when the time comes to replace these products. Consumers are getting smarter, and Sony are going to have to try harder to justify their premium price tags.

 

[Taleweaver]

I'm confused. Some weeks back, it was said that the video game aspect of sony was a sinkhole and that other departments needed to chip in to keep things afloat.

...and now the credit rating is lowered despite the prospects in the video game department of the company?

 

[FAST6191]

I'm confused. Some weeks back, it was said that the video game aspect of sony was a sinkhole and that other departments needed to chip in to keep things afloat.

...and now the credit rating is lowered despite the prospects in the video game department of the company?

On the one hand welcome to financial matters, it only gets more confusing from here.

On the other if I am reading it right it is runs something like "as Sony's tech empire shrinks, largely for reasons McHaggis just elaborated upon though also things like PCs being on the downslide and most consumers being a bit gunshy about new TVs, the game division is still shiny".

That said I do not really recall the game division article, MS had one along those lines (though more that the new CEO peoples had words to the effect of "we should spin Xbox off") but the last few Sony things I saw were more along the lines of "no chance of it being a massive boon, certainly not a company saver, but it is not predicted to lose much of anything". Even going back to the annual reports it did not have many bad things to say.

 

[Bobbybangin]

This is the second ratings firm to downgrade Sony to junk status. I did a short article when Fitch downgraded Sony to junk status here http://www.ps3hax.net/showthread.php?t=66317&highlight=sony+junk+status

And despite sluggish Wii U sales, Nintendo recently surpassed Sony in overall net value http://metro.co.uk/2014/01/08/nintendo-valued-as-bigger-company-than-sony-4254425/

Sony is pretty much taking losses in every department except for the PS4.

 

[Arras]

This is the second ratings firm to downgrade Sony to junk status. I did a short article when Fitch downgraded Sony to junk status here http://www.ps3hax.net/showthread.php?t=66317&highlight=sony junk status

And despite sluggish Wii U sales, Nintendo recently surpassed Sony in overall net value http://metro.co.uk/2014/01/08/nintendo-valued-as-bigger-company-than-sony-4254425/

Sony is pretty much taking losses in every department except for the PS4.

Nintendo's total public stocks might be worth more than Sony's but just make sure not to think that means Nintendo is worth more.

 

[Bobbybangin]

Nintendo's total public stocks might be worth more than Sony's but just make sure not to think that means Nintendo is worth more.

It specifically said "Net Market Value". So, I'm going to assume that Nintendo has a "Net Market Value" of $18.4 billion against Sony's "Net Market Value" of $17.7 billion. I know what it means and I did not take anything out of context.

 

[lovewiibrew]

In b4 all the fanboys come to Sony's defense.

 

[Arras]

It specifically said "Net Market Value". So, I'm going to assume that Nintendo has a "Net Market Value" of $18.4 billion against Sony's "Net Market Value" of $17.7 billion. I know what it means and I did not take anything out of context.

Sure, but people who read your post without fully understanding what it meant might.

 

[Bobbybangin]

Sure, but people who read your post without fully understanding what it meant might.

And despite that, two of the world's largest ratings firms still downgraded Sony to junk status. They didn't do that because it's good for them, the market, Sony or because they're a Nintendo or Microsoft fanboy. They did that because they have access to Sony's financials and they see real trouble. Meanwhile, everybody else is making much ado about nothing and commenting on what companies like Nintendo should do.

 

[cdoty]

...ok?

Pretty sure financial "news" isn't considered appropriate for USN, it's more General Off-Topic stuff.

There's a lot of relevance here.

The lifespan of the PS3 could be affected. Sony might see a financial advantage in ending support earlier, unlike the PS2. A $100 console, where they're lucky to make 5-10% isn't seen as a good business decision. This is a bigger issue with the PS Vita, as it's still struggling.

They debt rating affects the interest rate they pay to borrow. Sony might not be able to borrow enough money to make a large purchase of components needed to
reduce the cost of the PS4, or they'll have to pay more to do it. If Microsoft drops the price of the XBone, Sony will have to follow. But, if they can't build them cheaper, the price cut comes out of their pocket.

If developers feel Sony is in trouble, they could move on. The WiiU and 3DS are prime examples of the developer effect.

Developers will move on before users do, but the users will have to follow. All it takes is a couple of developers leaving PS4, at around the same time, to stir things up; the press will eat that up.

If this gets worse, the PS4 could become the next Dreamcast.

 

[Tom Bombadildo]

There's a lot of relevance here.

The lifespan of the PS3 could be affected. Sony might see a financial advantage in ending support earlier, unlike the PS2. A $100 console, where they're lucky to make 5-10% isn't seen as a good business decision. This is a bigger issue with the PS Vita, as it's still struggling.

They debt rating affects the interest rate they pay to borrow. Sony might not be able to borrow enough money to make a large purchase of components needed to
reduce the cost of the PS4, or they'll have to pay more to do it. If Microsoft drops the price of the XBone, Sony will have to follow. But, if they can't build them cheaper, the price cut comes out of their pocket.

If developers feel Sony is in trouble, they could move on. The WiiU and 3DS are prime examples the developer effect.

Developers will move on before users do, but the users will have to follow. All it takes is a couple of developers leaving PS4, at around the same time, to stir things up; the press will eat that up.

If this gets worse, the PS4 could become the next Dreamcast.

I was referring to it being in this section and on this forum, as 95% of this community are like 13 and they don't give a shit about a companies financial issues (which they shouldn't, because this shit literally happens all the time).

Which sort of brings me to my next point anyways, in the financial world this shit really does happen all the time. This isn't significant news, just like that whole "Macroaxis says Sony has 79% chance to go bankrupt OH GOD SONY IS DEAD OH NO-oh wait no they aren't lol" thread.

 

[emigre]

Sony are doomed.

 

[Foxi4]

The fact that Sony is a risky investment at this point in time is not something that anyone would consider "news" - their products often spike in terms of popularity, either they're terribad or absolutely fantastic. That's not all to blame on the gaming division though - this one's actually doing pretty fine as of late due to the recent release of the PS4, which as we all know, sells like cure for cancer. The actual problem Sony has are its other various businesses, because yet again, we cannot forget that Sony's manufacturing a wide variety of products and its main competition in those areas is not Nintendo but none other than Samsung. Unlike Samsung though, Sony appears to have a problem with striking a balance between good hardware and low prices - their products are high-end and great quality, but they often times cost a pretty penny which lowers their popularity in comparison to their Korean competitor. This can be seen especially in the TV and smartphone sectors in which Sony trails behind Samsung, but it's not a situation that cannot be reversed. Samsung didn't become a giant it is now overnight, and with the right re-structuring, Sony too can climb up the popularity ladder and return to its glory days.

 

[Gahars]

Wrong section. We already have a thread for this sort of thing.