Sony Suffers Credit Rating Downgrade

In a somewhat embarrassing move for the company, electronics giant Sony has found its credit and risk analysis rating downgraded, from a A+ to A, by respected financial ratings firm Standard & Poor’s. The rating change was outlined by Standard & Poor’s analyst Osamu Kobayashi, who commented: "The downgrade and negative outlook primarily reflect Sony's profitability, which has been strained from product and price competition, especially in its core electronics business, where there is still uncertainty regarding sustainable improvement in Sony's earnings-generating ability." He continued: "Sony has been undergoing major restructuring efforts to reduce fixed costs and increase its overall competitiveness. However, Sony's efforts to strengthen its product portfolio, including audiovisual products - a traditional strength for Sony - have lagged behind in an increasingly competitive market characterized by aggressive development and marketing of new products. There is a concern over the negative impact on Sony's market position." Although Sony's PlayStation Portable (PSP) was not mentioned by name, many consider the unexpectedly low Japanese launch price of the console, 19,800 yen (USD$186), to be one of the major causes for concern. With some suggesting that Sony will lose significant amounts of money on every PSP sold, the company will be looking at a loss of tens of millions of dollars in the first year of the format. Although the rating change is unlikely to have any real impact on the company’s borrowing power, it is already adversely affecting the company’s share price, especially as this is the first time Sony's credit rating has been changed in over ten years.