Is Sony Destined For Junk Status?

Sony Corporation

had its credit rating lowered by Standard & Poor's on Wednesday, with the credit rating agency citing Sony's weak profit outlook. The credit rating agency lowered Sony's rating one notch from A- down to BBB+, with a negative outlook. Sony, which was once one of the world's most respected companies, is now flirting with junk status. Just last week Sony warned that it was likely to report bigger losses than it had previously forecast. Sony has struggled to turn around its unprofitable television business because competition in the sector is strong and profit margins are weak. The company has also had to deal with production problems stemming from a number of natural disasters, including last year's earthquake and tsunami in Japan and the floods in Thailand. The company's bottom line has also been hurt by a strong yen that has reduced Sony's profit margins. Although Japan's Finance Ministry said on Tuesday that it had conducted stealth currency interventions last year to cool the rising yen and might do so again in the future, there's no guarantee that such an intervention would bring the yen down far enough to significantly benefit Sony's bottom line. The move by Standard & Poor's is just the latest downgrade that Sony has received from the major credit rating agencies, with both Moody's Investors Service and Fitch Ratings downgrading Sony recently. With no good news on the horizon, it's possible that Sony's losses could grow and the company's credit rating could eventually fall to junk status. Although stock markets across Asia were higher on Wednesday, Sony's stock was down 0.10, or -0.51%, to $19.68 during pre-market trading on the New York Stock Exchange.