Is Sony junk....

[Mt Spokane Photography]

In spite of my dislike of Sony as a company, their digital cameras are one of their bright spots right now, and are making money.

Where Sony is bleeding is in the Television and Phone part of the business. Its dragging down the whole company. That's where you may see some cuts.

Did you have a source for that info?

Read the Sony financial reports over the past two years.

 

[eml58]

but bashing someone for doing what they were paid to do and doing it right, does not make sense.

I'm sorry if you own Sony stock.

Ok, my last comments.

I dont own Sony Stock, I think I made that perfectly obvious in my previous post, so your attempt at trivialising is un appreciated.

My comments have been centred around Moodys, but they are relevant in my opinion to S&P and Fitch as well, these are largely unregulated companies that are allowed to produce "Ratings" based on an "issuer pays" model, i.e.. If you want a good rating, or in fact if you want a bad rating (there are reasons companies want a less than stellar rating), you pay these companies for that rating and they produce it.

My point has been be careful of ratings agencies and their ratings, these guys aren't exactly on the ball or trustworthy, and the following comment I feel gives some credence to my point.

In February 2013, the U.S. government filed a civil suit against S&P in a California court, seeking damages of $5 billion for the agency's alleged role in misleading investors during the run-up to the financial crisis. If S&P is found guilty and forced to pay such a penalty, it could spell the end for the embattled ratings agency, and produce a flow on that could affect Moodys & Fitch.

Others may argue that any rating from anyone is better than no rating at all, I disagree, you say you read Sony's financial reports ?? I haven't, but I do track news, and what I read tells me 4 of 5 divisions within Sony are making Money, unfortunately for Sony that one Division in the Red is dragging the rest of the P&L down, hence my position that I currently wouldn't hold Sony Stock, but I'de like to make you feel better about all this Mt Spokane, although I don't own Sony stock, I do own Apple stock, it's down 8% as of last night, feel good about that.

 

[Mt Spokane Photography]

I tried to copy just the summary from the 2013 annual report, its worse than I thought. If it weren't for Sony Financial (Banking), they'd be out of business.
Other than financial, none of the divisions are making much money, and the entertainment side along with mobile phones have monster sized losses. This has been ongoing for some years now, and their response is to invest more money into Entertainment and hope things get better.
http://www.sony.net/SonyInfo/IR/financial/ar/2013/

In 2009, they lost 98.9 billion yen, in 2010 they lost 40.9 billion yen, in 2011, they lost 259.5 billion yen, in 2012, they lost 456.7 billion yen, and in 2013 they had a profit of 43 billion yen, so things seemed to be improving, but their home entertainment business is taking the company down.

Moody's has actually been cutting Sony's rating every year that they fail to live up to the promises they made to stockholders the previous year. They work with Sony to understand what is happening and get promises. They did not rate Sony as junk last year like Fitch's did, cutting them some slack.

Moody's is the messenger, Sony is not going to make a big News release telling stockholders that its a big risk, they keep promising and forecasting more than they can deliver.

Times are tough, and the companies that make the tough decisions pull thru. There is also something to be said for companies that are able to remain focused on the long term, but for how many years can they keep struggling?

I certainly would like them to be successful, a healthy company can provide competition and invest in new technology that will benefit us all.

 

[jrista]

I tried to copy just the summary from the 2013 annual report, its worse than I thought. If it weren't for Sony Financial (Banking), they'd be out of business.
Other than financial, none of the divisions are making much money, and the entertainment side along with mobile phones have monster sized losses. This has been ongoing for some years now, and their response is to invest more money into Entertainment and hope things get better.
http://www.sony.net/SonyInfo/IR/financial/ar/2013/

In 2009, they lost 98.9 billion yen, in 2010 they lost 40.9 billion yen, in 2011, they lost 259.5 billion yen, in 2012, they lost 456.7 billion yen, and in 2013 they had a profit of 43 billion yen, so things seemed to be improving, but their home entertainment business is taking the company down.

Moody's has actually been cutting Sony's rating every year that they fail to live up to the promises they made to stockholders the previous year. They work with Sony to understand what is happening and get promises. They did not rate Sony as junk last year like Fitch's did, cutting them some slack.

Moody's is the messenger, Sony is not going to make a big News release telling stockholders that its a big risk, they keep promising and forecasting more than they can deliver.

Times are tough, and the companies that make the tough decisions pull thru. There is also something to be said for companies that are able to remain focused on the long term, but for how many years can they keep struggling?

I certainly would like them to be successful, a healthy company can provide competition and invest in new technology that will benefit us all.

+1 Well said!

 

[SithTracy]

I've never had good luck with any Sony product I purchased. I want to like them; my friends have good luck with them, I just don't. Their cameras are interesting given they purchased Minolta some years back and seem to be innovating. My Dad taught me to shoot on a Minolta XG-1 and he still has some lenses for it. I suggested he look into a Sony full frame, but he still won't buy digital... Of course he is in his 70's now.

While the A7(r) looks promising, I am more interested in the FujiFilm X system even though is is crop.

 

[Halfrack]

Toss in the devaluing of the yen, and things get more interesting. Culturally, Sony doesn't know how to play from behind. Their MP3 play was just horrible - remember the MiniDisk, having to re-encode your mp3's to play them? Their partnership with Erricson on phones worked until smart phones came around, then got killed. TV's and home electronics were undercut by Korean brands that produced the same quality for a much lower price. Toss in their forcing everything to MemoryStick failures and you see an brand ecosystem that just didn't play with others. Blu-ray isn't the standard for movies, even today in a 'everyone has a flat panel tv' world.

The brand value went down, and the under 30 crowd doesn't remember a time when it was cool to own a Sony - walkman, tv, phone, etc. it's kind of like Pioneer, their scope of success is just so small now, so their headcount and legacy costs are huge.

 

[brianboru]

Mt. Spokane described it very thoroughly and eloquently.

For those that want it in a just a single picture, look at this graph:

http://www.sony.net/SonyInfo/IR/financial/ar/2013/highlight/p2.html

Ouch.

 

[scottburgess]

Yes, but from the standpoint of pure self-interest I would be hesitant to invest much in a camera system that may not be supported over the long run. This is one reason to stick with Canon and Nikon. There is no guarantee of course, but I feel more comfortable with an investment in Canon lenses than I would in Sony.

I am put off most by Sony's lack of depth (lens choices, flashes, accessories). But my photographic pursuits align with the nature photographer, not the Christmas-with-the-kids shooter. And I would agree with you if you said this may be a limiting factor for them in the marketplace.

However, in SLRs Sony seems to have recently gained some market share at Nikon's expense. The big three are way ahead of the other IL camera makers, which include Olympus, Panasonic, Pentax-Ricoh, Leica, Zeiss, Sigma, Samsung... (consideration given here to micro-4/3rds and IL rangefinders). A very crowded field with Canon, Nikon, and Sony dominating the market share. Leica is a classic example of the boutique niche manufacturer. Some of the others likewise have interesting market differentiation and arguably a near-term future.

I'd be much more worried about owning Pentax. With the company split up between Hoya, Ricoh, and others, the recent absorption of the SLR division into Ricoh's B2B division (likely to support security cameras, which may be the only reason they bought half of the company), and the inability of the company to earn profits when they were whole despite having some talented engineers, I would guess they soon may be only a maker of compact cameras. The possible demise of such a prominent brand reminds me of Argus.

Playing the odds I would expect the big three to be around for quite some time. All three have huge businesses built around consumer-generated media, hold sufficient market share to have a long run in that business, and seem unlikely to strategically abandon photography and videography for the consumer/enthusiast/pro even if their balance sheets go weak in the knees.

 

[Skulker]

In spite of my dislike of Sony as a company, their digital cameras are one of their bright spots right now, and are making money.

Where Sony is bleeding is in the Television and Phone part of the business. Its dragging down the whole company. That's where you may see some cuts.

Did you have a source for that info?

Read the Sony financial reports over the past two years.

can't say I'm interested enough to trawl through to find it. I just wondered if you could point it out.

 

[mackguyver]

I can't speak for their stock, but the last several Sony products I've bought have been junk. Two of them died on days 91 and 93 of their 90-day warranty... They Sony of my childhood seems to no longer exist.

Also, BTW, did you know that their most profitable business is selling insurance (domestically in Japan). That's definitely not the home of the Walkman!

 

[Sella174]

Also, BTW, did you know that their most profitable business is selling insurance (domestically in Japan).

And obviously they don't underwrite the warranties on their own products. ???

 

[docsmith]

The power of labels is funny. Moody's didn't rate Sony as "junk." They down graded their rating of Sony BONDS by one step, out of 23 steps. The step just happened to drop Sony's rating from the lowest "investment" grade to the highest "speculative" grade. There are still 10 steps below Sony's current "Ba1" grade.

The primary functions of these ratings are to given investors looking to buy bonds a sense of the risk that the investor may be taking on that the company (Sony) won't be able to pay back that bond and to help set the rate of return/yield/interest that will attract investors. This is as much about comparisons as absolutes so that investors know that Sony bonds are about the same risk as bonds from company XX or more risky than company YY.

And speculate about Moody's all you want...but, given Sony's debt and recent financial losses, would you buy Sony debt for a very low interest rate? Or is the chance that they may default/go into bankruptcy enough that you may want more of a return on your investment to justify the risk. That is all this is.

"Junk" is just a label that makes for good press.

 

[unfocused]

"Junk" is just a label that makes for good press.

Exactly. "Junk Bond" is a term created by the media. No rating agency labels bonds as "junk."

And, you are absolutely correct, it serves as only a guide to investors. In fact, depending on market conditions, bonds that have a lower rating may sometimes sell with less interest than bonds that had a higher rating sold for just six months prior.

 

[jrista]

The power of labels is funny. Moody's didn't rate Sony as "junk." They down graded their rating of Sony BONDS by one step, out of 23 steps. The step just happened to drop Sony's rating from the lowest "investment" grade to the highest "speculative" grade. There are still 10 steps below Sony's current "Ba1" grade.

The primary functions of these ratings are to given investors looking to buy bonds a sense of the risk that the investor may be taking on that the company (Sony) won't be able to pay back that bond and to help set the rate of return/yield/interest that will attract investors. This is as much about comparisons as absolutes so that investors know that Sony bonds are about the same risk as bonds from company XX or more risky than company YY.

And speculate about Moody's all you want...but, given Sony's debt and recent financial losses, would you buy Sony debt for a very low interest rate? Or is the chance that they may default/go into bankruptcy enough that you may want more of a return on your investment to justify the risk. That is all this is.

"Junk" is just a label that makes for good press.

Yes, "Junk" is just a colloquial term which does make for good press, however it is also used in unofficial investment nomenclature. Junk refers to non-investment grade ratings. Because Sony is now Ba1, they are no longer a "prime" investment. There are three classes of prime investments and prime credit: Triple As, the As, and the triple Bs (or, in the case of Moodys odd nomenclature, Baa{n}.) Sony is now a Ba1/BB+ rating, which takes it out of the prime investment category, and classifies it as NON-investment. In other words...STEER THE HELL CLEAR, VERY HIGH RISK! The rewards can be very great, but the chances are also very great that instead of being rewarded, you'll lose whatever you invest in non-prime (i.e. junk) rated investments.

Junk is a very appropriate term. That's why it's been used to describe this class of non-investment worthy funds for decades.

 

[docsmith]

Yes, "Junk" is just a colloquial term which does make for good press, however it is also used in unofficial investment nomenclature. Junk refers to non-investment grade ratings. Because Sony is now Ba1, they are no longer a "prime" investment. There are three classes of prime investments and prime credit: Triple As, the As, and the triple Bs (or, in the case of Moodys odd nomenclature, Baa{n}.) Sony is now a Ba1/BB+ rating, which takes it out of the prime investment category, and classifies it as NON-investment. In other words...STEER THE HELL CLEAR, VERY HIGH RISK! The rewards can be very great, but the chances are also very great that instead of being rewarded, you'll lose whatever you invest in non-prime (i.e. junk) rated investments.

Junk is a very appropriate term. That's why it's been used to describe this class of non-investment worthy funds for decades.

Agreed....it was a one step decrease in the rating that when from investment to "speculative." It certainly isn't a good thing....but I bet most investors see it not as black and white...AAA or Junk....but as something that was already risky to something that has even more risk....

 

[jrista]

Yes, "Junk" is just a colloquial term which does make for good press, however it is also used in unofficial investment nomenclature. Junk refers to non-investment grade ratings. Because Sony is now Ba1, they are no longer a "prime" investment. There are three classes of prime investments and prime credit: Triple As, the As, and the triple Bs (or, in the case of Moodys odd nomenclature, Baa{n}.) Sony is now a Ba1/BB+ rating, which takes it out of the prime investment category, and classifies it as NON-investment. In other words...STEER THE HELL CLEAR, VERY HIGH RISK! The rewards can be very great, but the chances are also very great that instead of being rewarded, you'll lose whatever you invest in non-prime (i.e. junk) rated investments.

Junk is a very appropriate term. That's why it's been used to describe this class of non-investment worthy funds for decades.

Agreed....it was a one step decrease in the rating that when from investment to "speculative." It certainly isn't a good thing....but I bet most investors see it not as black and white...AAA or Junk....but as something that was already risky to something that has even more risk....

Sure, it isn't like it went from AAA to Junk in one move. However, dropping from Baa2 to Baa3 is less hazardous to a fund than dropping from Baa3 to Ba1. There is that additional line that is being crossed...simultaneously Sony went from being prime to being non-prime. That makes the one-step move from Baa3 to Ba1 more meaningful than the move from Baa2 to Baa3. Hence the reason it's made a rather obvious ripple in the media...it's a move that has more significance than any other prior move, even more significant than when it went from A class to B class.

 

[Hillsilly]

I can't speak for their stock, but the last several Sony products I've bought have been junk. Two of them died on days 91 and 93 of their 90-day warranty... They Sony of my childhood seems to no longer exist.

A 90 days warranty seems quite short? I don't know the source of Sony's financial problems, but I've always had a high opinion of Sony products. Around my place, we've got a wide collection, including audio recorders, clocks, a tv, PS3, a blu-ray player and I'm sure there is more. I've never had a problem with any of it.

But I understand what you are saying. When I was younger, Sony had a reputation as being one of the best quality manufacturers - with pricing to match. I've got a strong recollection of never being able to afford their gear. Now, their pricing makes them a lot more accessible and cost cutting must have taken its toll. Still, I'd have no hesitation buying Sony.

 

[jrista]

In the past, didn't Moodys also rate General Motors as junk?
And Ford?

Aye, they did. And, both companies deserved the rating at the time! Both companies worked their ASSES off, GM even wrote down some 46 BILLION in deferred taxes, to get their ratings back up. Ford still doesn't make the greatest cars, for that matter neither does GM, however I did gain a lot of respect for Ford for not taking a government bailout. If a junk rating is deserved, it should be given. If Sony turns themselves around, restructures themselves into a better, more reliable, and most importantly profitable corporation, then their credit rating should improve. If they do not, however, their credit rating will continue to degrade.

What might happen in the future doesn't play a role in what their rating should be right now, though. And what happened to other companies that have been rated junk in the past has absolutely no bearing on what Sony should be rated right now.

 

[CarlTN]

Interesting discussion. I don't profess to know a lot about a company's bonds. However, I notice that in the past 3 months or so, SNE's share price has averaged mid-way between its 52 week high and low. These are not huge swings in price...so investors must not think they will see Sony's demise anytime soon. Certainly there was a low point when the news broke, but the share price was still significantly above SNE's 52 month low.

Compare this with say, Tesla Motors. In the past 3 months, the share price has doubled. This looks like the very definition of "froth", not to mention some market manipulation. Is this company really poised for organic revenue growth? I don't see how. At some point the wealthy decide they own enough glorified golf-carts...

It's interesting that in the above discussion, the "junk" status was referred to in the debts of countries, specifically the USA and some countries in Europe. It's a shame we in the USA can't get a handle on our debt, but frankly I see it spiraling out of control. If $9 trillion of debt was "unpatriotic", what is $17 or $18 trillion? It spells certain doom...

 

[lw]

I can't speak for their stock, but the last several Sony products I've bought have been junk. Two of them died on days 91 and 93 of their 90-day warranty... They Sony of my childhood seems to no longer exist.

A 90 days warranty seems quite short?

In the EU those same Sony products have a 2 year warranty, and are required to do so by law.

I am not aware of any evidence to suggest that Sony products consistently fail within their warranty period.

But I bet there are lots of similar stories claiming Sony products fail on day 731... (or 732 if there was a leap year )