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Business

Sony's woes compounded after ratings downgrade

Struggling Japanese electronics giant Sony has seen its credit rating slashed by Standard & Poor's international ratings agency. The one-notch downgrade is a result of too slow a recovery after four years of losses.

Sony's creditworthiness was cut from BBB+ to BBB, Standard & Poor's said Tuesday, with the outlook for the firm's long-term corporate credit ratings seen as negative.

The downgrade has lowered Sony's rating to just two steps above 'non-investment grade,' also known as junk bond status, as Standard & Poor's expected the electronics giant's pace of recovery to remain "slow" throughout its current fiscal year, ending March 2013.

The ratings agency warned it could lower the credit rating further if Sony failed to demonstrate "solid signs of recovery within the next 12 months."

Sony accumulated losses of 456.66 billion yen (4.54 billion euros, $5.87 billion) in its last fiscal year through March 2012 - posting its fourth consecutive annual loss.

The maker of the PlayStation game consoles, mobile phones and television sets has already said it would cut about 10,000 jobs worldwide and spend nearly 1.0 billion euros on a business overhaul, described by its Chief Executive Kazuo Hirai as "urgent."

However, Sony appears headed for more gloom after reporting a widening loss for its latest quarter, forcing the firm to cut its 2012 earnings forecast.

Standard & Poor's also said it remained "neutral" on Sony's acquisition strategy - a reference to the firm's planned takeover of loss-making camera and medical equipment manufacturer Olympus.

Although Olympus would require a 50-billion-yen cash injection from Sony, the agency noted that Sony was known "historically" for making active strategic investments to "maintain competitiveness."

uhe/pfd (AFP, Reuters)

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