(The following statement was released by the rating agency)

HONG KONG/SYDNEY/SINGAPORE, August 01 (Fitch) Fitch Ratings says Sony

Corporation's (Sony, BB-/Negative) return to profit for the first quarter of the

financial year ending March 2014 (FYE14) is a step towards achieving long-term

profitability. However, profitability in its core electronics business remains

weak and, in Fitch's view, remains fragile to competitive pressure and exchange

rate risk. Fitch would look for Sony to reclaim technology leadership in key

products, further capitalise on its brand and improve profitability

significantly before considering upgrading it to investment-grade.

Sony reported an operating EBIT of JPY37bn in Q1 FYE14. However, excluding Sony

Financial Holdings, exceptional gains and favourable exchange rate impact, Sony

would have recorded an operating loss of JPY36bn, compared with a loss of

JPY42bn during the same period last year. The weaker yen alone bolstered Sony's

electronics revenue and operating EBIT by JPY191bn and JPY19bn respectively in

Q1 FYE14. The Japanese yen depreciated by 19%-20% yoy against the US dollar and

the euro.

The weakening of the yen has been positive for Sony, particularly for its

electronics and entertainment businesses in developed markets. However, the

company also expects a negative foreign exchange impact of JPY20bn on EBIT in

FYE14, due to emerging market currencies falling against the US dollar since

June 2013, which may wipe out the foreign exchange benefit seen in Q1 FYE14.

Profitability of the electronics business remains weak. Although Sony turned

around the electronics business in Q1 FYE14 with an EBIT of JPY13bn, this was

mainly driven by the yen depreciation and also the reclassification of JPY10bn

expenses to corporate overheads. Sony achieved some success in its Xperia

smartphones and LCD TVs, but it still lags in several areas, such as digital

cameras, games, PCs and other audio and video products. It pared its FYE14

electronics business operating profit target of JPY100bn to below JPY90bn.

Fitch believes that Sony would benefit from an increased focus on improving the

core electronics business. However, the proposal to spin off a small minority of

Sony's entertainment business will neither tighten the group's strategic focus

nor provide sufficient impetus to transform the electronics business. A partial

spin-off would generate capital to pay down debt or invest in new products, but

minority dividends would leak from the group's future cash flows. Credit

investors have benefitted from the relatively stable cash flows generated by

these operations.

Contacts:

Kelvin Ho

Director

+852 2263 9940

Fitch (Hong Kong) Limited

2801, Tower Two, Lippo Centre

89 Queensway, Hong Kong

Steve Durose

Senior Director

Head of APAC TMT Ratings

+61 2 8256 0307

Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email:

wailun.wan@fitchratings.com.

Additional information is available on www.fitchratings.com

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