Kaz Hirai's biggest challenge in his upcoming promotion to CEO of Sony will undoubtedly be to revitalize the company's once-glorious TV division. Having suffered a debt rating downgrade by Moody's three weeks ago, Sony is today getting another negative outlook, this time from Standard and Poor's. The creditworthiness assessors over at S&P believe that Sony's long-term earnings will continue to be hampered by the significant losses generated by its TV-producing arm and have lowered its long-term rating from A- to BBB+ as a result. Profitability for Kaz's TV business isn't expected to return until at least the fiscal 2014, a prognostication based on the numerous structural problems that need to be overcome, including Sony's high cost structure and "severe" price pressure from Korean competitors. And then there's always the profit-depressing effect of the Japanese yen's pervasive strength to contend with.
Standard and Poor's advice for Sony is to look to cut costs and focus on expanding profits rather than sales. Higher-margin items, albeit at the cost of conceding even more market share, is the route that S&P suggests for Sony to get back on track. Kaz Hirai pretty much agrees with this assessment, having already stated an emphasis on cutting costs and a four-point plan for returning Sony to its traditional position as a leader in the consumer electronics space. Whatever he does, corporate and financial analysts will be watching very closely throughout 2012 — a year that S&P considers crucial for Sony's long-term prospects.