Sony Corp. (6758) had its credit rating put on review for a possible downgrade at Standard & Poor’s because of weakening earnings at its TV business and the effects from purchasing Ericsson AB’s stake in their phone venture.
The “A-” long-term corporate credit and senior unsecured debt rating may be downgraded one rank, S&P said in a statement today, while affirming the “A-2” short-term rating for Tokyo- based Sony. “A-” is the seventh of S&P’s 10 investment grades.
“The likelihood of Sony’s weak earnings persisting has increased as there are no signs of a halt to the deterioration in the earnings of the company’s core flat-panel TV business,” S&P said. “In addition, Sony’s financial burden is likely to increase in tandem with the company making Sony Ericsson a wholly owned subsidiary.”
Sony shares tumbled 7.9 percent to close at 1,400 yen in Tokyo trading today, the lowest in 24 years. Shares have fallen 52 percent this year, compared with a 14 percent decline in the benchmark Nikkei 225 Stock Average.
Earlier this week, Japan’s largest consumer-electronics exporter forecast its fourth consecutive annual loss and slashed television sales targets after the yen reached a postwar high and floods in Thailand cut production.
Moody’s Rating
Sony also cut its annual sales forecast for personal computers, compact cameras and Blu-ray DVD players. JPMorgan Chase & Co. lowered its investment recommendations for Sony after the annual loss forecast.
“The fundamental issue is not external factors, but rather the need to create products and a business model that can differentiate Sony from the competition,” Yoshiharu Izumi, an analyst with JPMorgan Chase, said in a report.
Moody’s Investors Service said last week it was considering lowering its “A3” rating for Sony after the company said it would buy out Ericsson’s stake in their venture for 1.05 billion euros ($1.5 billion).
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