It seems that the bad news just won’t stop rolling in for Sony. On the back of a $2 billion loss, and lackluster sales of the PlayStation Vita, Sony have now had their “long-term corporate credit and senior unsecured debt ratings” lowered from an A- ranking to a BBB, suggesting that their problems will be long-term.
IGN reports that Sony’s rating was downgraded by a report by Standard and Poor’s (S&P), a credit agency continually observing how well companies are doing. “We base the downgrade on our view that severe circumstances in Sony’s mainstay electronics businesses make a strong recovery in earnings unlikely. We base the negative outlook on the long-term corporate credit rating on our expectation that we could lower the ratings further if we see no meaningful sign of recovery in Sony’s earnings within six to 12 months,” the report claims.
The report does not mention the PlayStation brand’s effect on Sony’s finances, and focuses on Sony’s other electronic products, placing a large proportion of the blame on Sony’s television sector. “Massive pressure on the prices of Sony’s key products, such as flat-panel TVs and mobile handsets, is likely to continue, and the company’s position in the global market is under strong pressure amid severe competition from Korean manufacturers and emerging Chinese companies.”
S&P’s report ultimately concludes that Sony’s financial troubles are coming from their high pricing. “Standard & Poor’s believes the major reason for the extended losses is Sony’s strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices, and its high cost structure compared with overseas competitors.”
This report will no doubt be bad news for Sony. With the PlayStation Vita already expected to sell at a lower price to compete with the Nintendo 3DS, the decreased income from other sectors means that strong sales of the Vita will not be enough for a positive financial change for Sony.