Sony Corp. (6758), the Japanese electronics- maker reeling from four straight annual losses, had its credit rating cut to the lowest investment grade by Moody’s Investors Service, citing falling demand for its televisions and cameras.
The long-term credit rating was cut one level to Baa3 from Baa2, Moody’s said in a statement today, assigning a negative outlook. Sony, which unexpectedly reported a seventh straight quarterly loss earlier this month, had its short-term rating cut to Prime-3, also the lowest investment grade, from Prime-2.
Sony has been downgraded continuously by six levels from its Aa3 rating in 2003 as the maker of Walkman music players struggled without a hit product to challenge Apple Inc. (AAPL) and Samsung Electronics (005930) Co. Ratings companies also downgraded Sharp Corp. (6753) and Panasonic Corp. (6752) this year as Japan’s electronics industry reels from competition with South Korea’s Samsung, rated A1 at Moody’s.
“Overall earnings will stay weak due largely to prolonged operating losses in TVs and mobile phones, as well as significant declines in earnings from digital imaging products and games,” Moody’s said in today’s statement. “The company is not expected to reduce debt significantly without resorting to cuts in capital expenditure or the sale of non-core assets.”
Sony fell 0.9 percent to close at 879 yen in Tokyo trading today, before the announcement. The stock is down 36 percent this year, extending a 53 percent loss last year. Samsung has gained 27 percent in Seoul, while LG Electronics Inc. (066570), with a Baa2 rating at Moody’s, has risen 3.4 percent.
Sony posted a net loss of 15.5 billion yen ($195 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.
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 said in the statement. 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.
Today’s downgrade is Sony’s third this year by Moody’s. Standard & Poor’s has cut the company’s long-term rating twice so far this year.
Sharp, the maker of Aquos TVs, was downgraded to junk by Fitch Ratings earlier this month. Panasonic, Japan’s second- largest TV maker, was downgraded by Standard & Poor’s after forecasting a loss 30 times bigger than analyst estimates.
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