Sony at greater risk than Panasonic in electronics downturn: Fitch

TOKYO (Reuters) - Panasonic Corp has a better chance than rival Sony Corp of surviving Japan's consumer electronics slump because of its unglamorous but stable appliance business of washing machines and fridges, credit rating agency Fitch said Friday.

Fitch cut Panasonic's rating by two notches to BB and Sony three notches to BB minus on Thursday, the first time one of the three major ratings agencies have put the creditworthiness of either company into junk-bond territory.

Rival agencies Moody's and S&P rate both of Japan's consumer electronic giants at the same level, just above junk status. Moody's last cut its rating on Panasonic on Tuesday.

Panasonic "has the advantage of a relatively stable consumer appliance business that is still generating positive margins", Matt Jamieson, Fitch's head of Asia-Pacific, said in a conference call on Friday to explain its ratings downgrades.

But at Sony, he added, "most of their electronic business are loss making, they appear to be overstretched."

Japan's TV industry has been bested by cheaper, more innovative models from Samsung Electronics and other foreign rivals, while tablets and smartphones built by Apple Inc have become the dominant consumer electronics devices.

Investors are focusing on the fate of Sony and Panasonic after another struggling Japanese consumer electronics firm, Sharp Corp, maker of the Aquos TV, secured a $4.6 billion bail-out by banks including Mizuho Financial Group and Mitsubishi UFJ Financial Group.

Sony and Panasonic have chosen divergent survival paths.

Panasonic, maker of the Viera TV, is looking to expand its businesses in appliances, solar panels, lithium batteries and automotive components. Appliances amount to around only 6 percent of the company's sales, but they generate margins of more than 6 percent and make up a big chunk of operating profit.

Sony, creator of the Walkman, is doubling down on consumer gadgets in a bid to regain ground from Samsung and Apple in mobile devices while bolstering digital cameras and gaming.

The latest downgrades will curtail the ability of both Japanese companies to raise money in credit markets to help fund restructurings of their business portfolios.

For now, however, that impact is limited, given the support Panasonic and Sony are receiving from their banks.

In October, Panasonic, which expects to lose $10 billion in the year to March 31, secured $7.6 billion of loan commitments from banks including Sumitomo Mitsui Financial Group and Mitsubishi UFJ, a financing backstop it says will help it avoid having to seek capital in credit markets.

Sony, which has forecast a full-year profit of $1.63 billion helped by the sale of a chemicals business to a Japanese state bank, announced plans to raise $1.9 billion through a convertible bond before the latest rating downgrade.

Thomson Reuters' Starmine structural model, which evaluates market views of credit risk, debt levels and changes in asset values gives Panasonic and Sony an implied rating of BB minus. Sharp's implied rating is three notches lower at B minus.

Standard & Poor's rates Panasonic and Sony at BBB, the second lowest of the investment grade, while Moody's Investors Service has them on Baa3, the lowest of its high-grade category. Moody's has a negative outlook for both firms while S&P sees a stable outlook for Panasonic and a negative one for Sony.

Stock markets in Japan were closed on Friday for a national holiday.

(Reporting by Tim Kelly; Editing by Mark Bendeich)

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Autonomy founder says HP allegations don't add up

LONDON (Reuters) - Mike Lynch, mathematics whiz and former boss of Autonomy, said he can't see how accusations leveled by Hewlett-Packard Co of dodgy accounting add up to a $5 billion writedown on the software business he sold them last year.

HP said on Tuesday it would write $8.8 billion off its $11.1 billion purchase of the British company, $5 billion of it due to "serious accounting improprieties" and "a wilful effort by Autonomy to mislead shareholders" revealed by a whistleblower and a forensic audit by accountants PricewaterhouseCoopers.

It has alerted regulators on both sides of the Atlantic.

Mike Lynch says he has yet to hire a lawyer and has not spoken to either HP or any investigators, but he has sat down with past accounts of the firm he founded in an attempt to answer the accusations laid out in HP's public statements.

HP's general counsel John Schultz claimed Autonomy created more than $200 million in revenue over a two-year period from 2009, which would amount to 12.5 percent of Autonomy's $1.6 billion in revenues in their annual accounts for 2009 and 2010.

While denying the allegations as "utterly wrong", Lynch said there were three areas where accounting rules gave scope for differences of interpretation.

Accounting rule setters have been working on plans for a decade for common global accounting rules so regulators and investors can compare company accounts, but until that task is complete, there are competing standards that can produce different results for companies doing broadly the same thing.

The International Accounting Standards Board (IASB) has devised International Financial Reporting Standards (IFRS), used in more than 100 countries, and the basis for Autonomy's accounts prior to HP's acquisition.

But many U.S. companies such as HP use U.S. Generally Accepted Accounting Principles (GAAP), which can differ from IFRS, notably in respect of software revenue recognition.

One of the accusations HP levels against Autonomy's former management is that the company was booking licensing revenue upfront before deals closed, thereby inflating revenue.

"Revenue recognition for software vendors can be complicated, to say the least," accountants Grant Thornton wrote in a note.

This is because software companies often bundle products and services such as licenses, installation, training and maintenance support into a single contract.

Under accounting rules, a company can establish a model for pricing different parts of the contract so that some revenue can be taken up front and the rest over the period of the contract.

Under IFRS this is governed by rule IAS 18. Under U.S. GAAP there are more stringent conditions to satisfy, requiring what is called VSOE, or vendor-specific objective evidence.

"It shouldn't be a surprise this issue is coming up. It shows how loosey-goosey IFRS is," said Lynn E. Turner, former chief accountant of the Securities and Exchange Commission, who was running the SEC department that issued Staff Accounting Bulletin 101, which set a lot of the specific rules around revenue recognition.

Lynch believes that HP might not have yet established its own VSOE model and therefore might not be recognizing revenues upfront, which might result in a restatement of Autonomy revenues.

"All of these deals went through (Autonomy's auditors) Deloitte themselves," said Lynch. "Deloitte apply the test independently of us, and it is a standard test, and it is explicitly stated in the annual report and accounts."

Autonomy would submit every single invoice to Deloitte each quarter as part of the auditing process, added Lynch.

Deloitte said it conducted its audit work "in full compliance with regulation and professional standards", and "categorically denied" any knowledge of improprieties or misrepresentations in Autonomy's financial statements.

HARDWARE

Another allegation HP has stated in public is that Autonomy mischaracterized revenue from low-margin hardware sales as software sales.

Autonomy always represented itself as a software firm but 10 percent to 15 percent of its revenue came from money-losing sales of low-end hardware, HP said.

Lynch said it was not a secret that Autonomy sells hardware. In company reports for 2009-2010, hardware sales accounted for around 8 percent of revenue. Occasionally, if a customer wanted a desktop, Autonomy would provide a package that might include desktops, for example, along with the software.

In terms of money-losing sales, Lynch acknowledged that in a small number of cases, deals were struck at a slight loss, in exchange for the client agreeing to market Autonomy products.

In those cases, the transaction would be charged as a marketing expense, not a direct cost of sales, but overall accounted for less than 2 percent of total revenues, Lynch said.

Though this "moves the gross margin a percent or two", it doesn't affect profit, he added.

RESELLERS

Another allegation made by HP is that Autonomy booked some licensing deals with partners as revenue, even though no customer bought products.

Autonomy generates most of its sales revenues through deals with over 400 clients including IBM and Wipro who resell the software to end-users.

Under IFRS, revenue can be recognized if sales are delivered in the current period, there is no right of return policy, collection is probable and the fee is fixed and determinable.

Lynch said only deals that fulfilled these criteria were booked as revenue.

Under U.S. GAAP, if Autonomy's sale was contingent on the reseller's sale, the latter must be completed before Autonomy can claim it as revenue.

Even so, Lynch said over 90 percent of resellers completed sales. In some cases, he said, it was perfectly reasonable to sell to a reseller with no end user as they might use the software themselves.

While these accounting differences could have an impact, Lynch believes it is hard to reach the dizzying figures that HP has come up with.

"There is nothing there that you can warrant such a big effect in terms of writedown," he insisted.

(Reporting By Anjuli Davies, additional reporting by Nanette Byrnes; Editing by Will Waterman)

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HP says products may have been sold to Syria by others

(Reuters) - Hewlett Packard Co said in a letter made public on Friday that its products could have been delivered to Syria through resellers or distributors, but the world's largest PC maker affirmed it did not sell directly to the country.

The letter was a response to a request from the U.S. Securities and Exchange Commission's Office of Global Security Risk that asked whether HP's products were sold in countries where they would be subject to U.S. sanctions.

"We are aware of November 2011 news reports that your equipment was installed by the Italian company, Area SpA, in Syria as part of a nationwide surveillance and tracking system designed to monitor people in that country," the SEC wrote in its request.

"Please describe to us the nature, duration, and extent of your past, current, and anticipated contacts with Syria and Iran, whether through subsidiaries, distributors, resellers, vendors, retailers, or other direct or indirect arrangements."

In a letter dated October 9, HP said it had not authorized the sale of products to Syria.

Instead, HP said the Italian surveillance company had likely obtained its products from an HP partner that was unaware of their ultimate destination.

In another October 9 letter to the agency, HP said it ended its contract with Area SpA in April.

Calls to HP seeking further comment were unanswered as were calls to Area SpA.

HP's overseas subsidiaries ended sales of printers and related supplies to third-party distributors and resellers with customers in Iran in early 2009, the company wrote.

But because its products are often sold by others through indirect channels without its knowledge or consent "it is always possible that products may be diverted to Iran or Syria after being sold to channel partners, such as distributors and resellers," HP said.

Reuters has documented how banned computer equipment from U.S. companies has made its way to Iran's largest telecommunications company through China-based ZTE.

Networking equipment maker Cisco Systems Inc has since cut its ties to ZTE.

HP said in both letters that it would continue to work with ZTE, but it had conducted an internal investigation relating to an alleged sale of its products to MTN Irancell, Iran's second largest mobile carrier.

The company was also asked about EDS - an IT outsourcing company that HP bought in 2008 - and any activity in Iran, Syria and Sudan.

HP said it had the same policy regarding Sudan as it did on sales to Iran or Syria.

HP is eager to avoid more negative publicity after surprising the market on Tuesday with an $8.8 billion write-down on its $11.1 billion acquisition of software group Autonomy, accusing the British company of improper accounting to inflate sales.

Autonomy has denied any wrongdoing.

(Reporting by Nicola Leske in New York. Editing by Leslie Gevirtz and Andre Grenon)

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10 Adorable Animals Feeding Other Animals [VIDEOS]

In June 2001, when Hawaii became the 35th state to adopt a Net Energy Metering (NEM) law to promote the installation of small renewable energy grid-connected systems, it probably seemed like one of those "duh" moments. All that sun power waiting to be harnessed would certainly transform the state into one blazing hot solar market.

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Sony at greater risk than Panasonic in electronics downturn: Fitch

TOKYO (Reuters) - Panasonic Corp has a better chance than rival Sony Corp of surviving Japan's consumer electronics slump because of its unglamorous but stable appliance business of washing machines and fridges, credit rating agency Fitch said Friday.

Fitch cut Panasonic's rating by two notches to BB and Sony three notches to BB minus on Thursday, the first time one of the three major ratings agencies have put the creditworthiness of either company into junk-bond territory.

Rival agencies Moody's and S&P rate both of Japan's consumer electronic giants at the same level, just above junk status. Moody's last cut its rating on Panasonic on Tuesday.

Panasonic "has the advantage of a relatively stable consumer appliance business that is still generating positive margins", Matt Jamieson, Fitch's head of Asia-Pacific, said in a conference call on Friday to explain its ratings downgrades.

But at Sony, he added, "most of their electronic business are loss making, they appear to be overstretched."

Japan's TV industry has been bested by cheaper, more innovative models from Samsung Electronics and other foreign rivals, while tablets and smartphones built by Apple Inc have become the dominant consumer electronics devices.

Investors are focusing on the fate of Sony and Panasonic after another struggling Japanese consumer electronics firm, Sharp Corp, maker of the Aquos TV, secured a $4.6 billion bail-out by banks including Mizuho Financial Group and Mitsubishi UFJ Financial Group.

Sony and Panasonic have chosen divergent survival paths.

Panasonic, maker of the Viera TV, is looking to expand its businesses in appliances, solar panels, lithium batteries and automotive components. Appliances amount to around only 6 percent of the company's sales, but they generate margins of more than 6 percent and make up a big chunk of operating profit.

Sony, creator of the Walkman, is doubling down on consumer gadgets in a bid to regain ground from Samsung and Apple in mobile devices while bolstering digital cameras and gaming.

The latest downgrades will curtail the ability of both Japanese companies to raise money in credit markets to help fund restructurings of their business portfolios.

For now, however, that impact is limited, given the support Panasonic and Sony are receiving from their banks.

In October, Panasonic, which expects to lose $10 billion in the year to March 31, secured $7.6 billion of loan commitments from banks including Sumitomo Mitsui Financial Group and Mitsubishi UFJ, a financing backstop it says will help it avoid having to seek capital in credit markets.

Sony, which has forecast a full-year profit of $1.63 billion helped by the sale of a chemicals business to a Japanese state bank, announced plans to raise $1.9 billion through a convertible bond before the latest rating downgrade.

Thomson Reuters' Starmine structural model, which evaluates market views of credit risk, debt levels and changes in asset values gives Panasonic and Sony an implied rating of BB minus. Sharp's implied rating is three notches lower at B minus.

Standard & Poor's rates Panasonic and Sony at BBB, the second lowest of the investment grade, while Moody's Investors Service has them on Baa3, the lowest of its high-grade category. Moody's has a negative outlook for both firms while S&P sees a stable outlook for Panasonic and a negative one for Sony.

Stock markets in Japan were closed on Friday for a national holiday.

(Reporting by Tim Kelly; Editing by Mark Bendeich)

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Autonomy founder says HP allegations don't add up

LONDON (Reuters) - Mike Lynch, mathematics whiz and former boss of Autonomy, said he can't see how accusations leveled by Hewlett-Packard Co of dodgy accounting add up to a $5 billion writedown on the software business he sold them last year.

HP said on Tuesday it would write $8.8 billion off its $11.1 billion purchase of the British company, $5 billion of it due to "serious accounting improprieties" and "a wilful effort by Autonomy to mislead shareholders" revealed by a whistleblower and a forensic audit by accountants PricewaterhouseCoopers.

It has alerted regulators on both sides of the Atlantic.

Mike Lynch says he has yet to hire a lawyer and has not spoken to either HP or any investigators, but he has sat down with past accounts of the firm he founded in an attempt to answer the accusations laid out in HP's public statements.

HP's general counsel John Schultz claimed Autonomy created more than $200 million in revenue over a two-year period from 2009, which would amount to 12.5 percent of Autonomy's $1.6 billion in revenues in their annual accounts for 2009 and 2010.

While denying the allegations as "utterly wrong", Lynch said there were three areas where accounting rules gave scope for differences of interpretation.

Accounting rule setters have been working on plans for a decade for common global accounting rules so regulators and investors can compare company accounts, but until that task is complete, there are competing standards that can produce different results for companies doing broadly the same thing.

The International Accounting Standards Board (IASB) has devised International Financial Reporting Standards (IFRS), used in more than 100 countries, and the basis for Autonomy's accounts prior to HP's acquisition.

But many U.S. companies such as HP use U.S. Generally Accepted Accounting Principles (GAAP), which can differ from IFRS, notably in respect of software revenue recognition.

One of the accusations HP levels against Autonomy's former management is that the company was booking licensing revenue upfront before deals closed, thereby inflating revenue.

"Revenue recognition for software vendors can be complicated, to say the least," accountants Grant Thornton wrote in a note.

This is because software companies often bundle products and services such as licenses, installation, training and maintenance support into a single contract.

Under accounting rules, a company can establish a model for pricing different parts of the contract so that some revenue can be taken up front and the rest over the period of the contract.

Under IFRS this is governed by rule IAS 18. Under U.S. GAAP there are more stringent conditions to satisfy, requiring what is called VSOE, or vendor-specific objective evidence.

"It shouldn't be a surprise this issue is coming up. It shows how loosey-goosey IFRS is," said Lynn E. Turner, former chief accountant of the Securities and Exchange Commission, who was running the SEC department that issued Staff Accounting Bulletin 101, which set a lot of the specific rules around revenue recognition.

Lynch believes that HP might not have yet established its own VSOE model and therefore might not be recognizing revenues upfront, which might result in a restatement of Autonomy revenues.

"All of these deals went through (Autonomy's auditors) Deloitte themselves," said Lynch. "Deloitte apply the test independently of us, and it is a standard test, and it is explicitly stated in the annual report and accounts."

Autonomy would submit every single invoice to Deloitte each quarter as part of the auditing process, added Lynch.

Deloitte said it conducted its audit work "in full compliance with regulation and professional standards", and "categorically denied" any knowledge of improprieties or misrepresentations in Autonomy's financial statements.

HARDWARE

Another allegation HP has stated in public is that Autonomy mischaracterized revenue from low-margin hardware sales as software sales.

Autonomy always represented itself as a software firm but 10 percent to 15 percent of its revenue came from money-losing sales of low-end hardware, HP said.

Lynch said it was not a secret that Autonomy sells hardware. In company reports for 2009-2010, hardware sales accounted for around 8 percent of revenue. Occasionally, if a customer wanted a desktop, Autonomy would provide a package that might include desktops, for example, along with the software.

In terms of money-losing sales, Lynch acknowledged that in a small number of cases, deals were struck at a slight loss, in exchange for the client agreeing to market Autonomy products.

In those cases, the transaction would be charged as a marketing expense, not a direct cost of sales, but overall accounted for less than 2 percent of total revenues, Lynch said.

Though this "moves the gross margin a percent or two", it doesn't affect profit, he added.

RESELLERS

Another allegation made by HP is that Autonomy booked some licensing deals with partners as revenue, even though no customer bought products.

Autonomy generates most of its sales revenues through deals with over 400 clients including IBM and Wipro who resell the software to end-users.

Under IFRS, revenue can be recognized if sales are delivered in the current period, there is no right of return policy, collection is probable and the fee is fixed and determinable.

Lynch said only deals that fulfilled these criteria were booked as revenue.

Under U.S. GAAP, if Autonomy's sale was contingent on the reseller's sale, the latter must be completed before Autonomy can claim it as revenue.

Even so, Lynch said over 90 percent of resellers completed sales. In some cases, he said, it was perfectly reasonable to sell to a reseller with no end user as they might use the software themselves.

While these accounting differences could have an impact, Lynch believes it is hard to reach the dizzying figures that HP has come up with.

"There is nothing there that you can warrant such a big effect in terms of writedown," he insisted.

(Reporting By Anjuli Davies, additional reporting by Nanette Byrnes; Editing by Will Waterman)

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12 Holiday Gifts That Give Back

1. Blanket America

Slogan: "Buy 1 Give 1" Blanket America sells quality blankets, comforters, sheet sets and other types of bedding, and in turn, the company makes a donation to Americans in need. You can also purchase goods through the "Choose Haiti" line of products, which helps provide disaster relief to people in Haiti.

Click here to view this gallery.

[More from Mashable: Amazon Cyber Monday Deals Begin Sunday]

Supporting important causes can be easy to forget amid the hustle and bustle of shopping during the holiday season. Luckily, there's an easy way to give back to those in need while you find the gifts you need -- various companies and websites do the legwork for you.

[More from Mashable: 10 Completely Useless Websites We Found in 2012]

Companies like TOMS and Warby Parker have become known for one-for-one deals -- donating a pair of shoes or eyeglasses for every pair sold -- but they're not the only ones with gifts that give back. There are several places around the web that benefit others in many ways, whether it's by supporting impoverished artisans, providing clothes to babies who need them or curating the many products that make a difference.

We've compiled a list of 12 websites that can help you make socially conscious purchases without subtracting the joy of shopping. Where do you go to buy gifts for social good? Let us know in the comments.

Thumbnail image courtesy of Instagram, Red Earth Trading Co.

This story originally published on Mashable here.

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HP says products may have been sold to Syria by others

(Reuters) - Hewlett Packard Co said in a letter made public on Friday that its products could have been delivered to Syria through resellers or distributors, but the world's largest PC maker affirmed it did not sell directly to the country.

The letter was a response to a request from the U.S. Securities and Exchange Commission's Office of Global Security Risk that asked whether HP's products were sold in countries where they would be subject to U.S. sanctions.

"We are aware of November 2011 news reports that your equipment was installed by the Italian company, Area SpA, in Syria as part of a nationwide surveillance and tracking system designed to monitor people in that country," the SEC wrote in its request.

"Please describe to us the nature, duration, and extent of your past, current, and anticipated contacts with Syria and Iran, whether through subsidiaries, distributors, resellers, vendors, retailers, or other direct or indirect arrangements."

In a letter dated October 9, HP said it had not authorized the sale of products to Syria.

Instead, HP said the Italian surveillance company had likely obtained its products from an HP partner that was unaware of their ultimate destination.

In another October 9 letter to the agency, HP said it ended its contract with Area SpA in April.

Calls to HP seeking further comment were unanswered as were calls to Area SpA.

HP's overseas subsidiaries ended sales of printers and related supplies to third-party distributors and resellers with customers in Iran in early 2009, the company wrote.

But because its products are often sold by others through indirect channels without its knowledge or consent "it is always possible that products may be diverted to Iran or Syria after being sold to channel partners, such as distributors and resellers," HP said.

Reuters has documented how banned computer equipment from U.S. companies has made its way to Iran's largest telecommunications company through China-based ZTE.

Networking equipment maker Cisco Systems Inc has since cut its ties to ZTE.

HP said in both letters that it would continue to work with ZTE, but it had conducted an internal investigation relating to an alleged sale of its products to MTN Irancell, Iran's second largest mobile carrier.

The company was also asked about EDS - an IT outsourcing company that HP bought in 2008 - and any activity in Iran, Syria and Sudan.

HP said it had the same policy regarding Sudan as it did on sales to Iran or Syria.

HP is eager to avoid more negative publicity after surprising the market on Tuesday with an $8.8 billion write-down on its $11.1 billion acquisition of software group Autonomy, accusing the British company of improper accounting to inflate sales.

Autonomy has denied any wrongdoing.

(Reporting by Nicola Leske in New York. Editing by Leslie Gevirtz and Andre Grenon)

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Samsung wins U.S. court order to access Apple-HTC deal details

SAN FRANCISCO (Reuters) - A U.S. judge has ordered Apple Inc to disclose to rival Samsung Electronics details of a legal settlement the iPhone maker reached with Taiwan's HTC Corp, including terms of a 10-year patents licensing agreement.

The Korean electronics giant had earlier filed a motion to compel its U.S. rival -- with whom it is waging a bitter legal battle over mobile patents across several countries -- to reveal details of the settlement that was reached on November 10 with HTC but which have been kept under wraps.

In August, the iPhone maker won a $1.05 billion verdict against Samsung after a U.S. jury found that certain Samsung gadgets violated Apple's software and design patents.

Now, legal experts say the question of which patents are covered by the Apple-HTC settlement, and licensing details, could be instrumental in Samsung's efforts to thwart Apple's subsequent quest for a permanent sales ban on its products.

The Asian company has argued it is "almost certain" that the HTC deal covers some of the same patents involved in its own litigation with Apple.

The court on Wednesday ordered Apple to produce a full copy of the settlement agreement "without delay", subject to an Attorneys-Eyes-Only designation.

Representatives for the U.S. company could not immediately be reached for comment.

Samsung also requested the California court to add three newly released Apple products -- the iPod Touch 5, the iPad 4 and the iPad mini -- to the list of devices that it claims to have infringed on some of its patents, according to court documents.

The settlement of Apple and HTC ended their worldwide litigation and brought to a close one of the first major flare-ups in the global smartphone patent wars.

Apple first sued HTC in 2010, setting in motion a legal conflagration that has since circled the globe and engulfed the biggest names in mobile technology, from Samsung to Google Inc's Motorola Mobility unit.

(Reporting By Edwin Chan; Additional reporting by Miyoung Kim in SEOUL; Editing by Muralikumar Anantharaman)

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Fitch cuts Sony, Panasonic debt ratings to "junk" status

TOKYO (Reuters) - Ratings agency Fitch downgraded the debt ratings of Japan's Sony Corp and Panasonic Corp to "junk" status citing weakness in their consumer electronics and TV operations, further diminishing the luster of the once-great Japanese brands.

The cut to below investment grade, the first by a ratings firm, comes as the floundering Japanese tech giants face weak demand and fierce competition from Apple Inc and Samsung Electronics.

A strong yen and bumps in China, where growth has slowed and Japanese goods have been targeted in sometimes violent protests recently, have also weighed on their earnings.

The two companies, along with Sharp Corp, racked up combined losses of $20 billion last year, leading them to axe jobs, sell assets and close facilities.

"Both Sony and Panasonic are struggling to generate operating profits, but each is restructuring and I don't envision the current situation continuing," said Masahi Oda, Chief Investment Officer at Sumitomo Mitsui Trust Bank.

"A collapse of their core business would be a problem, but we are not at the point yet, and to me Fitch looks too negative," Oda added.

Fitch downgraded Sony by three notches to BB-minus from BBB- minus, saying meaningful recovery will be slow. The move came after Sony, the maker of PlayStation game consoles and Vaio laptops, last week announced plans to raise 150 billion yen ($1.82 billion) through the sale of convertible bonds.

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

In a separate statement, Fitch cut Panasonic to BB from BBB-minus, a two-notch downgrade, citing weakened competitiveness in its TVs and display panels as well as weak cash generation from its operations. It has a negative outlook on both the companies.

The downgrade sent Sony's five-year credit default swaps (CDS), insurance-like contracts against debt default or restructuring, 5 basis points wider to 382.5/402.5 basis points.

Panasonic's CDS for the same maturity were quoted at 295/315 basis points, 15 basis points wider than in Thursday morning Asian trade.

Standard & Poor's rates the two consumer electronics makers at BBB, the second lowest of the investment grade, while Moody's Investors Service has Baa3 on them, the lowest of the high-grade category.

With two of the three major ratings agencies still having the two companies as investment grade, institutional investors won't face too great a pressure to cut their debt holdings in them, analysts said.

SONY SHARES TUMBLE

Sony shares shed 4.4 percent in Frankfurt on Thursday. The shares ended 1.8 percent higher at 834 yen in Tokyo before the Fitch announcement, trading not too far from their 32-year closing low of 793 yen hit on November 15. Sony stock is down 40 percent so far this year.

Panasonic shares were down 0.6 percent in Frankfurt in low volume. The stock inched up 0.7 percent to close at 407 yen in Tokyo trading, near its 34-year closing low of 385 yen reached on November 13.

Last month, Panasonic cut its forecast and warned it will lose close to $10 billion in the year to March, as it writes off billions of yen in tax-deferred assets and goodwill related to its mobile phone, solar panel and small lithium battery businesses.

Ahead of its earnings revision, Panasonic won $7.6 billion in loan commitments in October from banks including Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, a funding backstop it says will help it avoid having to seek capital from credit markets.

Sony made a small operating profit in the July-September quarter, helped by the sale of a non-core chemicals business, and kept its forecast for a full-year profit of $1.63 billion.

(Additional reporting by Dominic Lau in Tokyo and Umesh Desai in Hong Kong; Editing by Muralikumar Anantharaman)

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