Moody’s on Friday chopped Sony by one notch to Baa3 with a negative outlook, just above junk grade, citing ongoing struggles in the consumer electronics giant's television business.
Moody's last cut its rating on Sony on October 12, pointing to the once-iconic firm's weak profitability and cash flow as it struggles to move past a whopping $5.7 billion loss in the last fiscal year.
Sony's main domestic rivals Sharp and Panasonic have warned they are on track to book a combined annual loss topping $15 billion amid huge restructurings that include tens of thousands of job cuts.
Sony, by contrast, said it had shrunk its latest quarterly loss and was still on track to eke out a small annual profit, after four years in the red.
But Moody's warned the PlayStation and Bravia television maker would continue to suffer amid weakening demand for liquid-crystal display televisions and the soaring popularity of smartphones, a lucrative market where Apple and Samsung have blown past Japan's electronics giants.
"The rating actions reflect Moody's concern that an increasingly rapid deterioration in demand in the digital (audio-visual) market due to sluggish economic conditions and fast structural changes will weigh more heavily on Sony's earnings than previously expected," it said.
The ratings agency added that Sony would see stable earnings in some businesses including its music unit, but would struggle in televisions, mobile phones, cameras and videogames.
Sony "is not expected to reduce debt significantly without resorting to cuts in capital expenditure or the sale of non-core assets," it added.
Japan's electronics industry has suffered from a long list of problems, including a high yen, slowing demand in key export markets, fierce overseas competition and strategic mistakes which have left its finances in ruins.
Sharp, which makes Aquos-brand electronics, recently warned of a $5.6 billion annual loss, its credit rating has been reduced to junk by Fitch and Standard & Poors, and the firm itself has raised questions over its viability.
Copyright 2012 Agence France-Presse