Sony moody after “Junk” credit rating

Sony had a terrible year in 2013, with drastic losses back in November, when CEO Kazuo Hirai cut his earnings forecast by 40%, costing the company $2.2 billion in market value. Poor sales in the TV, PC  and movie areas of the company seem to be their biggest downfall, which has lead to Moody’s Investment Service cutting the multimedia corporation’s credit 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,” a spokesman for Moody’s said in a statement released on Monday.

It seems that despite selling 4.2 million PS4s by early January, Sony still cannot convince investors that their company is a worthwhile place to spend their money. Moody’s did admit they believe it likely that the PS4 will be profitable, but that the brand as a whole won’t recover “to the extent seen with the profitability level in 2010.” Sony’s credit rating has been lowered from Baa3 to Ba1, one level below the investment grade, and while Moody’s has described its outlook for the company as “stable”, this report is more likely to discourage potential investors and may even increase the cost of borrowing money.

With the recent release of the latest generation of consoles, it easy to forget that both Sony and Microsoft have a huge level of business outside of the games market. Moody’s has attributed most of their concern to these areas, stating that Sony’s “TV and PC businesses… face intense global competition, rapid changes in technology, and product obsolescence.”

With Nintendo announcing a downgrade in Wii U sales predictions just recently, that makes 2 of the so-called “Big 3” currently experiencing financial difficulties. All eyes are now on Microsoft.

Nic Bunce

Nic Bunce

A South African born, London raised Brit living in London. Studied Microbiology at the University of Leicester, and taught English in Japan. Jack of all trades and Master of the Universe...
Nic Bunce

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