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Register: 11/20/11
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Posted: 2/9/12, 6:47 PM
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Poor performance, global competition cited in the downgrade
In a move which shocked some, credit agency Standard & Poor's has come forward regarding Sony, downgrading the Japan-based entertainment giant's credit rating.
Quoting the text report released by Reuters:
"Standard & Poor's Ratings Services today lowered its long-term corporate credit and senior unsecured debt ratings on Sony Corp. to 'BBB+' from 'A-' and removed the ratings from CreditWatch, where we placed them Nov. 4, 2011. The outlook on the long-term corporate credit rating is negative. 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 a recovery in Sony's earnings within six to 12 months. We affirmed the 'A-2' short-term corporate credit rating on the company."
The report continues to state that Sony has had a series of revenue downfalls since 2004's fiscal year, also saying that the major contributor 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."
S&P also stated it is watching Sony's path toward recovery in the TV sales market to determine if any further downgrades will occur.
Gaming division not mentioned
It should be noted that the report made no mention of the gaming division (owner of several gaming studios and several MMO titles including EverQuest, EverQuest II and DC Universe Online) as a reason for success or failure for the company, who employs approximately 168k employees worldwide.
According to sources, the gaming division is unaffected by this downgrade and is looking forward to positive growth this year with its IP DC Universe Online having been announced as "Best MMO of 2011" by PC Gamer.
There has been no official statement made by Sony as of the time we went to print. However, we will continue to provide details as they become available.
Update (2/9/2012): Corrected information pertaining to the gaming division after contact with sources inside Sony.
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