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Moody's Downgrades Sony Again

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Moody's Investor Service has cut its credit rating for Sony (NYSE: SNE) to Baa3, the lowest investment grade rating. Moody's also put Sony on negative watch. One more downgrade would reduce Sony's debt to junk status.

"Without robust restructuring in the coming 12-18 months, Sony's non-financial services businesses will at best achieve roughly break even, and are also at risk of remaining unprofitable," the rating agency said in a report cited by Reuters.

“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,” Bloomberg noted.

Sony has been struggling with losses in its television business as it has been unable to compete with Samsung Electronics (OTC: SSNLF) and LG Electronics (OTC: LGEAF). In the games business, Sony's Playstation has been struggling against Microsoft's (Nasdaq: MSFT) X-box.

One area where Sony has been making some headway is in mobile phones. In a survey by market research company Canalsys cited by ZDNet, Sony was the number three mobile phone manufacturer during the third quarter, beating out HTC (OTC: HTCXF) and Research in Motion (Nasdaq: RIMM) but well behind market leaders Samsung and Apple (Nasdaq: AAPL).

The Financial Times commented, “Sony has struggled to shift its focus from the increasingly unprofitable business of hardware manufacturing to the sort of integrated design, software and content-distribution model pioneered by Apple.”

“Sony would be in even deeper trouble if not for its film and music businesses and its Japanese financial services arm,” the FT continued, “profitable areas whose earnings have partly offset its losses in electronics.”

In a related story, Tim Schaaf, president of Sony Network Entertainment, who was recruited from Apple in 2005, has announced that he will be retiring at the end of the year.

Sony's ADR is trading at its lowest level since June 11, 1987.

Latest Ratings for SNE

DateFirmActionFromTo
Aug 2014JefferiesMaintainsBuy
Feb 2014CitigroupUpgradesNeutralBuy
Feb 2014JefferiesInitiates Coverage onBuy

View More Analyst Ratings for SNE
View the Latest Analyst Ratings

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