The rating agency's outlook on the company is negative

Standard & Poor's Ratings Services confirmed its unfavorable outlook on Sony's long-term corporate credit rating, and even dropped its long-term corporate credit and senior unsecured debt ratings on the Japanese company from "A-" to "BBB+."

According to Standard & Poor's Ratings Services, Sony has been downgraded because of decreased demand, heightened competition in Sony's mainstay businesses, and a "massive erosion of prices."

The rating agency further explained that Sony's TV business in particular has experienced losses since fiscal 2004, and that the unit expects a huge net loss in fiscal 2011 as well of ¥220 billion.

"Standard & Poor's believes the major reason for the extended losses is Sony's strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices, and its high cost structure compared with overseas competitors," said Standard & Poor's Ratings Services in its report. "Massive pressure on the prices of Sony's key products, such as flat-panel TVs and mobile handsets, is likely to continue, and the company's position in the global market is under strong pressure amid severe competition from Korean manufacturers and emerging Chinese companies.

"In our view, an enhanced focus on profits, rather than on expanding sales, and efforts to lower costs are likely to reduce losses in its TV business. However, circumstances are so severe that Standard & Poor's believes it will be difficult for Sony to return its TV business to profitability even in fiscal 2013. Therefore, we see a low likelihood of a strong recovery in Sony's earnings in the next two years or so."

The rating agency added that Sony's profitability isn't looking great either compared to its competition due to consecutive net losses since 2008. Standard & Poor's Ratings Services predicts Sony's adjusted total debt total debt to capital will increase to about 40 percent March 31, 2012, up 5 percent from March 2010.

If Standard & Poor's Ratings Services sees no significant sign of recovery from Sony in six to 12 months, this overall rating could be lowered even further.

Sony had a tough year throughout 2011, with several cyber attacks launched against its PlayStation Network (PSN) database and Sony Online Entertainment (SOE) database as well as other units of the company like Sony BMG Greece.

As far as the TV business struggles go, Sony decided to negotiate a buyout of its 50 percent manufacturing stake in the LCD joint venture with Samsung.

Source: Reuters

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