Sony stocks downgraded to 'junk' by Fitch credit ratings agency

Credit ratings agency Fitch has downgraded Sony's stocks to "junk" status, the Financial Times reports.

The agency has dropped the investment-grade ratings of both Sony and Panasonic, which are downgraded to BB-minus and BBB-minus grades, respectively. Fitch is the first major agency to downgrade these companies.

"This wasn't an easy decision," said head of corporate research Matt Jamieson. "But their reputations have been hit so much that it'll take a long while to crawl back."

Junk status refers to anything of BB status or lower, suggesting the company is at high risk of defaulting and has little chance of short or medium term gains. According to the agency, Sony's financial issues were propelled by the company's weakening TV business alongside economic conditions throughout Japan.

The downgrade "reflects Fitch's belief that meaningful recovery will be slow, given the company's loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen," stated the ratings group.

Under Kaz Hirai, Sony has initiated large-scale cost-cutting measures to help fight significant operating costs. The company has been affected by the rise of brands such as Samsung and LG Electronics.

Earlier in the month Sony's revised sales forecast for PlayStation Vita and PlayStation Portable devices, having lowered sales expectations from 12 million to 10 million units by March 31 of next year.Sales and operating income for PlayStation declined in the second quarter of FY12, attributed to the decline in hardware sales.