Sony's Financial Rating Downgraded

It appears that Nintendo isn't the only company suffering financial woes as of late. Sony, whose offerings stretch well beyond gaming, recently announced a $2.9 billion loss. This is just one of several reasons that has led to Standard and Poor lowering Sony's long-term corporate credit and senior unsecured debt ratings to a BBB+.

Because of continuing net losses since fiscal 2008, Sony's profitability looks significantly weaker than that of its global industry peers. In addition, we believe its ratio of adjusted debt to EBITDA is likely to remain high for the next one to two years, even for companies in the 'BBB' category. Standard & Poor's also believes Sony's adjusted total debt to capital (excluding finance operations) will rise to around 40% as of March 31, 2012, from 35% a year earlier. However, we base our one-notch downgrade on our view that Sony's profitability and financial standing will gradually recover in fiscal 2012 because there will be no repeat of one-off expenses due to floods in Thailand and impairment losses on stockholdings.

If you have no idea what any of that financial mumbo jumbo means, think of it in terms of a consumer credit report on a much larger scale. Sony has been struggling since fiscal year 2008 to post any positive financials. This may also be why former CEO and President Howard Stringer stepped down earlier this month. Kazuo Hirai, former president of the Consumer Products & Services Group for Sony, has taken over as the new CEO for the company. 

With the PSP Vita coming out later this month in North America, it should interesting to see what steps Hirai and Sony take in order to turn things around for the company  

Source: Reuters