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Friday, October 13, 2006

Sony Gets An Upgrade (SNE)(MSFT)

Sony's shares rallied in Tokyo as Morgan Stanley upgraded the electronics firm from "equal weight" to "overweight".

Maybe someone spiked the punch at the Morgan Stanley office party.

Fitch recently downgraded Sony's debt because it expects the company's financial situation to get worse for the next year or two. The reasons were primarily competition from companies like Microsoft and Nintendo who are trying to take more share from the Playstation3, and the Sony PC battery recalls.

The Fitch analysis was fairly damning: "Sony has failed to realise the synergies between its hardware and software capabilities and has not been able to bring innovative and break-through consumer electronics products to the market for a while".

But, Fitch is not alone in its concerns about Sony. In the last few days there have been further concerns about the late launch of the new PS3 in Europe.

There are also concerns that Sony's lay-offs, which total 30,000 employees over the last thre years, have damaged the company's ability to innovate and bring "hot" products to market.

There are even rumors in the press that Sony CEO Howard Stringer's job could be in jeapordy.

One would think that all of these issues would be a caution that Sony still had deep problems, but Morgan Stanley seems to think otherwise.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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