S&P puts Sony under review on grim outlook
(Adds fund manager comments paras 8-9, Moody's rating)
TOKYO, Aug 27 (Reuters) - Sony Corp <6758.T>, which stunned
investors and analysts with a steep drop in first-quarter
earnings, had the outlook on its long-term corporate credit
ratings put under negative review by Standard & Poor's on Monday.
The investment ratings agency said it put the outlook on Sony
and related entities Sony Capital Corp and Sony Europe Finance
PLC to negative from stable.
At the same time, S&P affirmed its single-"A"-plus long-term
and "A-1" short-term ratings on the companies.
"The outlook revision reflects concerns that ongoing weakness
in the global electronics market could prevent Sony from meeting
its profit targets," S&P said in a statement.
BNP Paribas analyst Masayuki Yonezawa said: "Electronic
companies' earnings have become steadily worse this year, but
Sony had been holding up well.
"But the first-quarter result was quite a surprise and that
has been seen in its weak stock price. I don't think any
investors were surprised by the announcement."
Sony shares edged higher on Monday by 1.61 percent to 5,690
yen, slightly outpacing the broader market where the Nikkei 225
average <.N225> gained 0.97 percent.
Hideki Kamiya, senior fund manager at Asahi Tokyo Investment
Trust Management, which oversees 388.24 billion yen of investment
trusts, said the outlook review would not have a significant
impact on Sony's stock.
"It could take some of the shine off of Sony's recent bounce,
but much of the firm's earnings woes are already factored into
the price," he said, referring to Sony's last two days of gains.
But the shares have plunged 19.5 percent in the month since
the first-quarter earnings announcement, made on July 26, in
which it also cut its earnings forecasts for the year ahead.
Group operating profit tumbled to 3.00 billion yen ($24.98
million) in the April to June quarter -- a 90 percent slide
year-on-year and far below analyst forecasts.
The outlook for the financial year to March 2002 was revised
to group operating profit of 250 billion yen from an April
forecast of 300 billion yen.
"Sony's profitability in the electronics segment has
deteriorated over the past few months, especially in digital and
communications products such as mobile phones, components,
displays, and semiconductors," Standard & Poor's said.
It added it is concerned that Sony will find it difficult to
meet even these new targets.
"The rating on Sony could be lowered if the company is unable
to meet its revised profitability projections, and if its strong
cash flow generation is threatened," S&P said.
Rival U.S. rating agency Moody's Investor Service rates Sony
and related financial entities short- and long-term debt at Aa3
with its outlook under negative review.
((Tokyo Equities Desk +81-3-3432-9404
tokyo.equities.newsroom@reuters.com))
($1=120.12 Yen)
REUTERS
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