Sony shares plunge 11% by close on slashed full-year outlook | business | Hindustan Times
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Sony shares plunge 11% by close on slashed full-year outlook

business Updated: Nov 01, 2013 14:31 IST

Sony shares plunged more than 11% on Friday after the Japanese electronics giant slashed its full-year profit outlook, dealing a blow to its much-vaunted turnaround plan.

The stock finished at 1,668 yen in Tokyo, a day after Sony cut its earnings forecast for the year to March by 40% due to tepid demand for its digital cameras, personal computers and televisions.

It also pointed to a weaker-than-expected performance in its film business because of box office flops such as "White House Down" and "After Earth".

On Thursday, the maker of Bravia televisions and PlayStation games consoles said it lost 15.8 billion yen ($160 million) in the six months to September and cut its full-year profit outlook to 30 billion yen from 50 billion yen.

Before the tumble, Sony stock had nearly doubled since January as it rode a strong rally.

"Conditions are harsher than what we had anticipated," Sony chief financial officer Masaru Kato told reporters Thursday.

The weak results prompted a warning from some analysts that the firm may have to slash its business further to climb back into the black.

A "more aggressive reform to revamp the company's product portfolio and to cut fixed costs may be required," ratings agency Fitch warned in a report Friday, and said it was considering a credit rating downgrade.

"Another round of major cost cutting is a distinct possibility."

The agency downgraded Sony last year, cutting its credit rating to junk for the first time while doing the same to rival Panasonic.

Fitch and other global ratings agencies have been slashing their ratings on the sector as they pointed to weak balance sheets and a declining position in the global electronics market.

Hiroichi Nishi, SMBC Nikko Securities general manager of equities, said Sony's slimmed down forecast was not a complete shock, but "the negative news came just when the overall market was weak".

Japan's electronics giants, including Sony rivals Panasonic and Sharp, have been undergoing painful restructuring to stem years of losses as they struggle to keep up in the low-margin television business.

Apple and South Korea's Samsung surged ahead of their Japanese rivals in the lucrative smartphone sector, although Sony has done better than its domestic rivals with its Xperia offering.

Panasonic and Sharp shares were lifted Friday, rising 6.19% and 1.03% respectively, as the pair reported improved financial results a day earlier.

Sony chief Kazuo Hirai has shrugged off pleas to abandon the television unit, while the firm has also turned down a call by US hedge fund boss Daniel Loeb to spin off 20% of its entertainment arm, which includes the Hollywood film studio, to boost profits.

The latest results mark a challenge for Hirai who has vowed to drag the once world-beating firm back to its former glory, and make the television and electronics business profitable.

His efforts got a boost after the firm posted a small net profit in its latest fiscal year, after four years in the red. But it was largely due to a weak yen and selling off assets, including its Manhattan office building for over $1.0 billion, as part of a wider restructuring.

The company is now banking on strong holiday sales of its PlayStation console as rivals Nintendo and Microsoft also jockey for control of the sector.

Sony and its key domestic rivals have benefited from a sharply weaker yen, which makes them more competitive overseas and inflates repatriated foreign income.

The unit has tumbled since late last year on the back of a government-led policy blitz aimed at stoking growth in Japan's long stagnant economy.

But "unless there is further depreciation of the yen, we do not expect currency effects to deliver much further growth", Fitch said.

Shunsuke Tsuchiya, an analyst at Credit Suisse, said there was a "strong risk" Sony would have to slash its full-year forecast again, according to Dow Jones Newswires.