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Sony NYSE:SNE cut to Junk by Fitch, Wall St. has abandon its stock

MSFT, NTDOY, AAPL, SSNLF

Sony has not seen any benefited from its new CEO, as it is still struggling to right its consumer electronics business.

It PS3 franchises are under pressure from Microsoft NASDAQ: MSFT Xbox product which have received heavy promotion with the addition of Windows 8 to them. And, rival Nintendo PINK:NTDOY has launched it Wii U product which will get massive marketing support.

Sony is left with its tiny PC and cellphone business, neither of which have market share, as they try to compete with Apple NASDAQ: AAPL and Samsung PINK:SSNLF.

Sony does have its studio business, which is hostage to the success or failure of blockbuster films.

Credit agency Fitch looked at the aggregate carnage and downgraded Sony’s debt to Junk status while keeping its Creditwatch status as negative:

Fitch Ratings has downgraded Sony Corporation’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to ‘BB-’ from ‘BBB-’ and maintained the Outlooks at Negative.

Fitch said: 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. Excluding Sony Financial Holdings (SFH), for the financial years ending March 2013 and March 2014 (FYE 2013, FYE 2014), Fitch expects operating EBIT margins to be negative or minimal and funds flow from operations (FFO)-adjusted leverage to be above 4.5x. Significant recovery in FYE 2015 will depend on the success of the turnaround plan which will be a challenge given the company’s circumstances.

Fitch believes that continuing weakness in the home entertainment & sound and mobile products & communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components.

Sony’s share price reflects Wall St’s abandonment of the stock.

The consumer electronics giant, the Apple of the 1990s, is left with few options; spin out of the studio business to shareholders, film division has nothing to do with the balance of the company. And, it must decide if it wants to sell its lowest margin electronics operations to interests in Korea or China. Sony may well break up…Stay tuned.