Covered by Reuters earlier today, the Fitch ratings agency shifted the debt rating of consumer electronics companies Panasonic and Sony down to “junk” status. This marks the first time that either company has been downgraded to this status level. Specifically, Panasonic’s rating has been shifted from a BB status to a BBB- and Sony’s rating has moved from BB- to BBB-. These new ratings indicate that Fitch believes any form of economic recovery will be extremely slow in the coming years.
Within a press release regarding the change in debt rating, Fitch representatives stated “Fitch believes that continuing weakness in the home entertainment & sound and mobile products & communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components.”
When combined with Sharp Corp., the total losses for the three companies over the past year is over $20 billion. Both Sony and Panasonic are currently changing organizational structure by cutting jobs as well as selling off assets.
The decrease in the profitability of Sony and Panasonic is related to the slowing demand for new television sets, the strength of the yen and increased competition from Samsung and Apple in the consumer electronics space. With more people shifting to consuming entertainment on tablets and smartphones, it’s been difficult for Sony and Panasonic to compete in those spaces.
Over the last year, Sony’s stock has fallen by approximately forty percent and hit an all-time, 32-year low last week at 793 yen. Similarly, Panasonic’s stock hit a 34-year low on November 13 at 384 yen. It’s likely that this news could cause stock prices to fall even lower throughout the end of the year. Panasonic is in a slightly better position than Sony for economic recovery as the company isn’t as dependent on core consumer electronics like high definition televisions and home theater components.
It is sad to see once great companies fall like this. This is a lesson for companies not to take their consumers for granted.
Sony have coasted for five years or more now. Their TVs used to set the benchmark standard are now very poor value. The playstation Vita, whilst good, was quite late. The Playstation3 hasn’t seen much compelling new content. Their cameras have been respectable but not capturing a huge market share. Their phones, having bought out Ericsson, are respectable but Sony haven’t had the mind share of Samsung, Apple or HTC.
Panasonic have mostly maintained their quality but I imagine margins are very thin. Their Lumix cameras are well regarded but don’t have the same mind share as Canon or Nikon, although they are working hard to change that with recent new models (the G5 and GH3 settings new standards). They’ve faltered in their attempts at mobile phones and abandoned their recent new model. They don’t have the studios or content factories like Sony, which means they live or die by their hardware sales, as they don’t have a “platform” like Apple or Sony.
It is not surprise. Even Sony guys think that they are 2nd or third brand in electronics the do crap and only crap, 8 years ago i had Sony LCD TV, sony digital camcorder, sony fancy photo camera slim and beautifyl and Vaio laptop, thwy were integrated in best way, i could record DVD from camcorder with computer on one click and also we could watch pictures and movies from the photo camera to to TV and controli it from the same remote, and sony play station 2…….
But now, we use the same TV at my wife office as marketing screen, at home we use Samsung, we have Canon camrecorder, all PC is Apple including tablets and iPhones…..
My wife and son use Sony Phones but both of them think their phones are crap. My son who was fan of Sony and tring to convince me thet its phone Sony Experia S is better then my iPhone droupout that when by no reason its phone touch screen stops to work…..
Sad but thrue, they never in the last couple years introduces new technology or new services even they have them in their labs, they lost ability to inovate and stayed behind their corporate decisions.