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Sony and Samsung post strong profits, outlook mixed

business Updated: Oct 29, 2010 14:03 IST

Reuters
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Sony Corp and South Korean rival Samsung Electronics posted strong quarterly results on a recovery in demand for gadgets and Sony surprised investors by raising its outlook despite a strong yen.

Panasonic Corp, which vies with Sony for the title of world's largest consumer electronics company, also posted a jump in quarterly profit but stuck to its annual outlook, citing signs of weakness in the European and U.S. markets.

Sony, which competes with Samsung and LG Electronics in televisions and with Nintendo and Microsoft in games, reported a 68.65 billion yen ($847 million) operating profit for July-September, against a loss a year ago.

Sony also raised its annual profit forecast to 200 billion yen from 180 billion yen, boosted by strong sales of Vaio personal computers and PlayStation 3 game consoles, after the recent launch of its Move motion-based videogame controller.

The consensus-beating results suggest Sony is making progress on cost-cutting led by Chief Executive Howard Stringer, who has struggled to boost the company's margins and come up with hit products since taking the helm five years ago.

CUTTING COSTS, PRICES

"It's quite impressive to see Sony swinging back to profit when its business conditions were really tough, with the yen surging and TV makers cutting prices to battle weak demand," said Kim Yeong-Jun, analyst at LIG Investment & Securities in Seoul.

"I think it's the result of Sony's aggressive restructuring and cost cuts implemented in the past couple of years ... and I think Sony will be able to overtake LG Electronics as the No.2 TV maker at least in value terms."

Samsung, the world's top maker of memory chips, reported a 4.9 trillion won ($4.36 billion) operating profit for the July-September quarter on Friday, matching a consensus forecast of 12 analysts polled by Reuters.

But analysts expect Samsung's profits to drop 25 percent in the current quarter, hit by slumping demand for chips and screens and with growing price competition set to hit flat TV margins ahead of the year-end shopping season, analysts said.

"A slowdown in the memory chip sector is ahead as DRAM prices are set to fall, probably through the first quarter of next year," said Hwang Yoo-shik, an analyst at SK Securities.

"But new devices such as the tablet PC could be Samsung's next big thing and may help offset a slowdown in other businesses ... I expect Samsung's earnings to pick up from the first quarter of next year."

Shares in Samsung, Asia's most valuable technology firm with a market value of $112 billion, fell 2.5 percent. The stock has dropped about 5 percent so far this year.

Prior to the announcement, Sony shares closed down 1.4 percent at 2,690 yen.

Sony shares have fallen about 26 percent since hitting a two-year peak in March. The Tokyo market's electrical machinery subindex is down about 13 percent over the same period.