Ratings agency Moody's on Friday downgraded Japanese electronics titans Sony and Panasonic, giving both companies a negative outlook.
The agency lowered its assessment on debt issued by Sony to Baa1 from A3, citing "weak and volatile" earnings.
It downgraded Panasonic to A2 from A1, saying its analysts were concerned "that the weakness in Panasonic's profile will continue".
Moody's said around $5 billion worth of long-term debt issued by Sony was affected by its announcement, which it said was due in large part to "its loss-making TV business, which is grappling with severe competition, sharp price declines, and a strong yen".
"Sony expects to incur an operating loss of about 125 billion yen ($1.6 billion) and an operating margin loss of about 14 percent, excluding one-time expenses of 50 billion yen, in the TV business, which accounts for over 15 percent of its non-financial services," the agency said in a statement.
It said Sony's ending its LCD panel joint venture with Samsung would give it more flexibility to buy those components on the open market.
"However, Moody's believes that it will still be challenging for the company to make a profit in the TV segment in the next two years," the statement said.
Moody's said around 900 billion yen of Panasonic bonds would be affected by its announcement on the firm's long-term debt.
"The company's financial profile has deteriorated since it acquired the remaining stakes in its two major consolidated subsidiaries, Panasonic Electric Works Co. Ltd. and Sanyo Electric Co. Ltd," the agency said.
"Panasonic's net debt rose to about 550 billion yen... from about 100 billion yen in the prior year, while its adjusted-debt-to-capitalisation increased to about 45 percent from about 35 percent.
"In Moody's opinion, Panasonic is unlikely to restore its financial profile in a timely manner. Among the most prominent reasons are continued losses in its TV business and declines in earnings from its semiconductor business."