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Moody's says Sony's debt is one step away from being classified as junk
Moody’s is a credit rating agency you might have heard of while watching the news about the financial crisis. They give companies scores so that investors know what they’re getting themselves into. Companies typically borrow money so they can grow, and that debt is then given a rating. Today Moody’s has decided to lower Sony’s credit rating to “one grade above junk”. Their exact words:
“Without robust restructuring in the coming 12-18 months, Sony’s non-financial services businesses will at best achieve roughly break even, and are also at risk of remaining unprofitable.”
So what does this all mean? Sony is obviously more than just their smartphone business. They’re a massive consumer electronics company, and they even make a fair amount of components. Chances are the smartphone in your pocket right now has a camera module that was made by them. Traditionally Sony has been a company that has innovated on the technology side, but that type of research and design has been neglected. Don’t believe us? Back in April of this year, Sony got together with Toshiba and Hitachi to work on small and medium sized LCD displays. They called the new joint venture “Japan Display Incorporated”, JDI for short. Think about that for a second, Sony had to partner with their competitors in order to stay alive!
What can Sony do to turn things around? Their new CEO, Kazuo Hirai, has been in charge for a little over seven months. He’s focusing the company on what he calls three pillars: digital imaging, gaming, and mobile. Thus far this new strategy has cost thousands of people their jobs, so … it’s really hard to say what’s going to happen in the future.
Trust us, we wish we could say something positive about Sony, we can’t wait to see their 5 inch 1080p superphone, the Yuga, but things are looking a bit bleak.