Moody's Investors Service has dropped Sony's rating to "junk" status, or from Baa3 to Ba1 which is one level below investment grade. While Standard & Poor rates Sony at two notches higher than junk, it matches the junk rating by Fitch. As a consequence, it will be more difficult for the company to borrow money.
Moody explains that while Sony has cut staff and made leaps and bounds in its gaming division, it believes that Sony will continue to struggle in the coming years due to its other business segments:
While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilize its overall profitability and, in the near term, to achieve a profile that Moody's views as consistent with an investment grade rating.
Of primary concern are the challenges facing the company's TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence.
Sony's profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses—such as TVs, mobile, digital cameras and personal computers—to continue to face significant downward earnings pressure.
The only piece of good news is that Moody's believes that the outlook for Sony is still "stable," due in part to the holiday success of the PlayStation 4, selling over four million units as stated from Sony announcement at CEX 2014.
