"loss of technology leadership in key products" and endure a strong yen. Competition is fierce.
Sony hasn’t managed to challenge rivals Apple and Samsung. Their recent fiscal revealed a poor showing of PlayStation Vita and a ¥15.5 billion loss. The rating drop "wasn't an easy decision".
The latest quarterly report covering the three months to September was Sony's seventh consecutive loss. However Sumitomo Mitsui Trust Bank is more optimistic.
"Both Sony and Panasonic are struggling to generate operating profits, but each is restructuring and I don’t envision the current situation continuing. A collapse of their core business would be a problem, but we are not at the point yet, and to me Fitch looks too negative," said Sumitomo Mitsui chief investment officer, Masahi Oda.
The company sold convertible bonds to raise around ¥150 billion to repay debts, invest in new business and complete the acquisition of streaming cloud service Gaikai. Rating agency Fitch is painting a rather gloomy picture of Sony.
The credit rating agency "believes that continuing weakness in the home entertainment and sound and mobile products and communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components.”
“This wasn’t an easy decision. But their reputations have been hit so much that it’ll take a long while to crawl back,” added Matt Jamieson, head of Fitch's corporate research. Sony's stock has tumbled 40% for this fiscal so far. Fitch reports that they've been one of seven who've performed terribly among the Nikkei 225 stock exchange. However Fitch's Steve Durose believes the weakening Japanese currency could see a reverse of fortunes.
"BB ratings indicate that companies are vulnerable to defaulting on debt over time, but have sufficient flexibility for now to keep servicing that debt,” concluded Fitch's report, not entirely condemning the giant to ruin.