Forums - Sony Discussion - SONY set to JUNK status

It has been coming:

Bloomberg: (Updated)

 

Sony, Panasonic Credit Rating Cut to Speculative Grade

 

By Naoko Fujimura and Terje Langeland - Nov 22, 2012 10:11 AM GMT

Sony Corp. (6758) and Panasonic Corp. (6752), the Japanese electronics makers reeling from record losses, had their credit ratings cut to junk for the first time by Fitch Ratings amid slumping demand for their televisions.

Sony’s rating was cut by three levels to BB-, three steps below investment grade, and Panasonic by two levels to BB, with the outlook on both companies being negative, Fitch said in separate statements today. Both companies had their short-term ratings reduced to B from F3.

The companies will struggle amid a strong yen and weakened economic conditions at home and overseas, Fitch said. After dominating the consumer-electronics industry since the 1980s, Sony, Panasonic and Sharp Corp. (6753) have resorted to cutting jobs, closing plants and selling assets after failing to come up with hit products to challenge Samsung Electronics Co. and Apple Inc. (AAPL)

“The future of both companies will depend on their ability to curb loss-making segments and rediscover the kind of technological leadership, which historically enabled them to develop must-have products,” Steve Durose, Fitch’s head of technology ratings for the Asia-Pacific region, said in a statement. “Sony is the higher risk of the two, hence its lower rating.”

Yuki Shima, a spokeswoman at Tokyo-based Sony, and Chieko Gyobu, a spokeswoman at Osaka-based Panasonic, said their companies don’t comment on ratings changes.

Shares Collapse

Shares of Sony, Panasonic and Sharp sank to their lowest levels in more than 30 years in Tokyo this year as investors remain unconvinced the companies can rebound from mounting losses without hit products. The three companies combined are valued at $24 billion, compared with $528 billion for Apple and $192 billion for Suwon, South Korea-based Samsung.

Sony, founded in 1946 and the inventor of the Walkman player that revolutionized the music industry in the 1980s, was worth more than $120 billion in 2000. Its shares gained 1.8 percent to 834 yen in Tokyo trading today before the downgrade. The stock has lost 40 percent this year.

Panasonic, founded in 1918, rose 0.7 percent to close at 407 yen, trimming its loss this year to 38 percent.

“The downgrades may put pressure on shares,” said Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings Inc. (8707) “No measures to revive these companies have been found yet.”

Extra Yield

The extra yield investors demand to own Panasonic debt over similar-maturity sovereign bonds has fallen from 354 basis points on Nov. 7 to 197 basis points as of 5:14 p.m. in Tokyo, according to the Japan Securities Dealers Association. Investors demanded a premium of 63 basis points on Oct. 31, the data show.

The extra yield investors demand to own Sony’s 45 billion yen ($544 million) of 0.664 percent bonds due March 2017 rather than government debt fell six basis points to 116 today, according to JSDA prices. The notes were priced in March at a spread of 36 basis points, according to data compiled by Bloomberg.

Borrowing costs in the corporate-bond market have climbed for the three Japanese electronics makers as record losses and widening deficit forecasts sapped investor confidence.

Sony posted a net loss of 15.5 billion yen for the quarter ended Sept. 30, compared with the 15.6 billion-yen average profit of three analyst estimates compiled by Bloomberg before the Nov. 1 announcement. The company, which has reported losses in each of the past four years, retained its forecast for full- year net income of 20 billion yen.

Meaningful Recovery

Sony was downgraded to the lowest investment grade on Nov. 9 by Moody’s Investors Service, which cited falling demand for the company’s TVs and cameras. Moody’s cut Panasonic to the same level on Nov. 20.

Sony Chief Executive Officer Kazuo Hirai is cutting 10,000 jobs and selling assets as he focuses on mobile devices, games and digital imaging to revive the company. Sony sold a chemical- products making unit, stakes in two display-making ventures and invested in Olympus Corp. (7733) after racking up 692 billion yen in losses selling TVs in the past eight years.

“Meaningful recovery will be slow, given the company’s loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen,” Fitch said in today’s ratings statement.

Continuing weakness at Sony’s home entertainment, mobile and communications businesses will offset its “relatively stable” music and movie operations and improvements at its components businesses, Fitch said today.

Market Share

Sony had 7 percent of the global TV market in the quarter ended Sept. 30, down from 8.4 percent the previous quarter, according to DisplaySearch. Panasonic dropped to 6.2 percent from 6.8 percent in the same period. Samsung remained No. 1 with 25.2 percent, according to the researcher’s website.

Net debt for Sony’s non-financial services businesses increased by 400 billion yen from March to September, partly because of higher financial needs, Moody’s has said. Gross debt for Sony’s non-financial services businesses increased to about 1.25 trillion yen in September from 1.15 trillion yen in March. Cash and deposits decreased to about 420 billion yen from about 720 billion yen.

Panasonic, the maker of Viera televisions and Lumix cameras, forecast a 765 billion-yen net loss for the year ending March 31. That would be the second-biggest loss in company history after the 772 billion-yen net loss the previous year.

Today’s downgrade “reflects Panasonic’s weakened competitiveness in its core businesses, particularly in TVs and panels, as well as weak cash generation from operations,” Fitch said. “Panasonic will continue to suffer from frail economic conditions in both Japan and overseas and resultant weak demand for its products, as well as continuing price competition from overseas companies.”

Sharp, the Osaka-based maker of Aquos TVs, was downgraded to junk by Fitch earlier this month.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Terje Langeland in Tokyo at tlangeland1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

 

 

Daily Telegraph

Sony and Panasonic cut to junk status by Fitch

Japan's embattled electronics sector suffered another blow this morning as rating agency Fitch downgraded the country's two largest TV makers, Sony and Panasonic, to junk status.

The agency slapped a speculative rating on each firm, pointing to their weak balance sheets and declining position in the global electronics sector.

Fitch said it cut Panasonic by two notches to BB, while it slashed Sony's rating by three notches to BB-, with both firms given a negative outlook.

"The downgrade reflects Panasonic's weakened competitiveness in its core businesses, particularly in TVs and panels, as well as weak cash generation from operations," Fitch said in a statement.

"It also reflects the agency's view that the company's financial profile is not likely to show a material improvement in the short to medium term."

Fitch also cast doubt on Sony's prospects, saying a "meaningful recovery will be slow, given the company's loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen".

Panasonic was also downgraded to one level above junk by Moody's earlier this week.

Japan's electronics giants have suffered as the high yen makes their products less competitive overseas while they posted losses in their mainstay TV businesses owing to fierce competition from South Korean and Taiwanese rivals such as Samsung

 

Bloomberg

Sony, Panasonic Credit Rating Cut to Speculative Grade

By Naoko Fujimura - Nov 22, 2012 7:55 AM GMT

Sony Corp. (6758) and Panasonic Corp. (6752), the Japanese electronics makers reeling from record losses, had their long-term credit ratings downgraded to junk by Fitch Ratings, citing a weak recovery in the television market.

Sony’s rating was cut by three levels to BB-, three steps below investment grade, with a negative outlook, Fitch said in a statement today. Panasonic’s was lowered two levels to BB, also with a negative outlook, the ratings company said in a separate statement. Both companies had their short-term ratings reduced to B from F3.

 

Sony Corp. and Panasonic Corp., the Japanese electronics makers reeling from losses, had their long-term credit ratings downgraded to junk by Fitch Ratings. 

The companies will struggle amid a strong yen and weakened economic conditions in Japan and overseas, Fitch said. Japan’s two largest TV makers and smaller rival Sharp Corp. (6753) are suffering from weakening demand and increasing competition with Samsung Electronics Co. and Apple Inc. (AAPL)

“Meaningful recovery will be slow given the company’s loss of technology leadership in key products,” Fitch said of Sony. Panasonic’s downgrade reflects reduced competitiveness and weak cash generation, the ratings company said.

Yuki Shima, a spokeswoman at Tokyo-based Sony, and Chieko Gyobu, a spokeswoman at Osaka-based Panasonic, said their companies don’t comment on ratings changes.

30-Year Lows

Shares of Sony, Panasonic and Sharp all sank to their lowest levels in more than 30 years in Tokyo this year as investors remain unconvinced the companies can rebound from mounting losses.

Borrowing costs in the corporate bond market have climbed for the three as record losses and widening deficit forecasts sapped investor confidence.

Sony was downgraded to the lowest investment grade on Nov. 9 by Moody’s Investors Service, which cited falling demand for its TVs and cameras. Moody’s cut Panasonic to the same level on Nov. 20.

Sony posted a net loss of 15.5 billion yen ($188 million) for the quarter ended Sept. 30, compared with the 15.6 billion- yen average profit of three analyst estimates compiled by Bloomberg before the Nov. 1 announcement. The company retained its forecast for a full-year net income of 20 billion yen. Sony has posted losses in each of the past four years.

Hirai’s Plan

Chief Executive Officer Kazuo Hirai is cutting 10,000 jobs and selling assets as he focuses on mobile devices, games and digital imaging to revive the Tokyo-based company. Sony sold a chemical-products making unit, stakes in two display-making ventures and invested in Olympus Corp. (7733) to revive growth after racking up 692 billion yen in losses selling TVs in the past eight years.

Net debt for Sony’s non-financial services businesses increased by 400 billion yen from March to September, partly because of higher financial needs, Moody’s had said. Gross debt for Sony’s non-financial services businesses increased to about 1.25 trillion yen in September from 1.15 trillion yen in March. Cash and deposits decreased to about 420 billion yen from about 720 billion yen.

Panasonic, the maker of Viera televisions and Lumix cameras, forecasts a 765 billion yen net loss for the year ending March 31. That would be the second-biggest loss in company history after the 772 billion yen net loss in the previous year.

Sony rose 1.8 percent to close at 834 yen in Tokyo trading before the downgrade was announced. The stock has declined 40 percent this year while Japan’s benchmark Nikkei 225 Stock Average has advanced 11 percent.

Panasonic rose 0.7 percent to close at 407 yen, trimming its loss this year to 38 percent.

Sharp, the Osaka-based maker of Aquos TVs, was downgraded to junk by Fitch earlier this month.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujim




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DAMN! That's not good at all!!

Yet another reason for PS4 to be MAKING money at the get go!!

Sony seriously have to do something. Soon!

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Furthermore, I think VGChartz should add a "Like"-button.

All according to 10 years plan.

Have to see if the other rating agencies follow suit. I suspect they might.

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Holy crap......

So does this mean shit just got real? Or is this just a label and not refoective of Sonys actual condition. I know they are hurting hut junk status sounds extreme

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I'm pretty sure its all part of the plan.

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BenVTrigger said:
Holy crap......

So does this mean shit just got real? Or is this just a label and not refoective of Sonys actual condition. I know they are hurting hut junk status sounds extreme


Shit got real a year or more ago. People just chose to ignore/deny it.



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Galaki said:
All according to 10 years plan.

lol



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I really don't like to see this happen, I've enjoyed Sony products for more than two decades and really grown to like them. Its not like I own stock or anything but its sad to see the giant wobbling on it's feet like this.

Hope Hirai is the man for the job and turns them around, he at least understands which divisions need to go and which ones to gamble on further (I say gamble because that's what it is).

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If the PS4 becomes a financial nightmare like the PS3 was / is, Sony will have some major issues. A company with a market cap of 10 billion should not release a product they expect to lose 3 billion in the first 2 years. It is just way too risky.