Fitch cuts Sony, Panasonic credit rating to 'junk'

Fitch, one of the world’s three biggest credit rating agencies, has just downgraded Sony and Panasonic’s stock to ‘junk’ status.

The two Japanese manufacturers are downgraded in different press releases with different reasons, so let’s take a look at each separately.

Sony in particular is downgraded due to a weakness in home entertainment and mobile products, and despite a recent improvement in devices including smartphones. Sony’s traditional strengths like TVs and cameras however have a steady downward momentum.

"Fitch 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," Fitch said.

The downgrade for Sony is big, by three notches, down from BB- to BBB- and will make Sony’s financial and credit operations costlier.

Sony however is undergoing a transition under new chief executive Kaz Hirai, and in terms of smartphones at least we are seeing some improvement.

Panasonic on the other hand has tried to come back with smartphones in Western markets in the recent past with devices like the Eluga, but has now killed that effort as competition mounts up.

source: Reuters