Ratings firm downgrades Sony, Panasonic to 'junk' status

Ratings agency Fitch has downgraded both electronics firms due to business "weakness".
Written by Charlie Osborne, Contributing Writer
fitch downgrades sony panasonic junk status

Ratings agency firm Fitch has downgraded struggling firms Sony and Panasonic, citing "weakness" in both businesses. 

Reuters reports that the New York and London-based agency has cut the debt ratings of the Japanese electronics giants due to weakening businesses, caused by fierce competition from rival firms including Apple and Samsung, as well as poor consumer demand.

In Asia, a strong yen, slowing growth in China and a volatile atmosphere between China and Japan -- where factories and goods have sometimes been targeted in political protests -- have also weighed in when downgrading both firms. 

On Thursday, Sony was downgraded three points, from BB-minus to BBB minus. The credit ratings agency said that recovery, if attainable, is likely to be slow for the floundering firm.

"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," the firm said in a statement.

Panasonic has been downgraded by two notches, and has gone from BB to BBB minus due to poor cash flow and poor consumer demand for its display panels and television sets.

Sony's Q2 earnings showed the firm is slowly recovering, after losing $5.7 billion last year and $312 million in the first quarter. Panasonic may have a chance at recovery -- even though reports suggest it will let go a further 10,000 workers by March 2013 -- as it expects tablet sales to put the firm's display unit back into profit.

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