Sony shares plunge 11% on slashed full-year outlook

Shares in Sony plunged more than 11 percent on Friday morning after the Japanese electronics giant slashed its full-year profit outlook, dealing a blow for its much-vaunted turnaround plan. -- FILE PHOTO: AP
Shares in Sony plunged more than 11 percent on Friday morning after the Japanese electronics giant slashed its full-year profit outlook, dealing a blow for its much-vaunted turnaround plan. -- FILE PHOTO: AP

TOKYO (AFP) - Shares in Sony plunged more than 11 percent on Friday morning after the Japanese electronics giant slashed its full-year profit outlook, dealing a blow for its much-vaunted turnaround plan.

The shares were trading at 1,665 yen in Tokyo, a day after Sony cut its earnings forecast for the year to March by 40 percent 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 due to 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 (S$199 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 after releasing the poor results.

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, while firms including Apple and South Korea's Samsung surge ahead in the lucrative smartphone sector.

Sony has done better in the smartphone segment than its domestic rivals with its Xperia offering.

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 percent 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 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.

However, Koki Shiraishi, analyst at SMBC Nikko Securities in Tokyo, warned that the effect could be short-lived.

"The impact of a weak yen will start disappearing in the second half of the fiscal year, which will cut their profit." "There are still tough times ahead for Japanese electronics makers," he added.

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.