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Stock Strategist

How Sony Lost Its Moat

We're removing Sony's moat due to further deterioration of the brand and weakness in gaming, music, and movies.

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Nostalgia surrounding  Sony's (SNE) electronics, especially the dominant Walkman and PlayStation franchises, may create a sense of Sony as a powerful brand, but we believe the firm has lost a step on the competition in terms of design and no longer commands the premium pricing it once enjoyed. Sony holds considerable market share, but size does not necessarily translate into profits in these competitive markets.

Sony's largest segment, the electronics business, has been in decline for some time, but the strength of the gaming division in combination with the movie and music franchises had warranted a narrow economic moat. However, over the last decade we have witnessed further deterioration of the electronics brand, a reversal in console leadership, and disruptive trends in the music and movie segments that materially weaken Sony's prospects. Therefore, we are removing the firm's narrow economic moat rating.

Michael Holt does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.