UPDATE 6-Sony posts Q4 loss, sees growth in TVs, games

(Adds U.S. stock activity in seventh paragraph)

By Kiyoshi Takenaka and Nathan Layne

TOKYO, May 14 (Reuters) - Sony Corp (6758.T) posted a surprise quarterly loss on Wednesday after a weak stock market ate into the value of securities held by its financial arm, but forecast a bigger-than-expected profit this year.

It suffered an operating loss of 4.7 billion yen ($45 million) in January through March, an improvement from a 113 billion yen loss a year earlier but short of an average estimate of a 27.3 billion yen profit from five analysts surveyed by Reuters.

Sony, locked in a three-way battle with Microsoft Corp (MSFT.O) and Nintendo Co Ltd (7974.OS) in the game industry, has been able to narrow losses on the PlayStation 3 game console by cutting manufacturing costs and expanding sales.

It aims to turn its videogame and TV operations into profit this year.

The electronics and entertainment conglomerate has also enjoyed strong sales of Cyber-shot digital cameras, VAIO PCs and Handycam video camera, helping push its operating profit up more than five-fold in the business year that ended on March 31.

"Considering that Sony was operating under adverse economic conditions, including a strong yen, both the results and outlook seem to show that Sony's stamina has grown stronger," said Kazuhara Miura, an analyst at Daiwa Institute of Research.

Sony shares trading on the New York Stock Exchange rose 7.4 percent to $49.48 in morning trade on Wednesday after the results.

Sony has been cutting jobs and shedding non-core assets over the past three years in far-reaching turnaround efforts led by Chief Executive Howard Stringer. The company plans to disclose its new business strategy in June.

The fourth-quarter loss was due mainly to a slide in the value of stocks and convertible bonds held by its financial unit.

Sony expects operating profit to rise 20 percent to 450 billion yen in the year to March 2009, beating the previous market consensus of 428.5 billion and despite tough business conditions such as a firmer yen and rising raw material prices.

It aims to sell 17 million LCD TVs in the year to next March, up from 10.6 million in the year just ended. That compares with Sharp Corp's (6753.T) target to sell 10 million LCD TVs and Matsushita's (6752.T) plans to sell 11 million flat TVs.

In an effort to achieve the ambitious flat TV sales target, Sony, which traditionally has strengths in mid-range to high-end products, plans to launch low-cost, entry models this year, broadening its Bravia LCD TV lineup.

RECORD PROFIT

In its game business, Sony aims to raise its PlayStation 3 sales by 8 percent this business year to 10 million units. That compares with rival Nintendo's plan to boost sales of its Wii console by 34 percent to 25 million units.

"Rather than chasing higher unit sales by cutting prices haphazardly, we plan to put our resources in areas like online services and to focus on profitability," Sony Chief Financial Officer Nobuyuki Oneda told a news conference.

For the year ended March 31, group operating profit surged to 374.5 billion yen from 71.8 billion, helped by smaller game losses and one-off gains from the sale of part of its former headquarters site and chipmaking facilities. But the result still missed Sony's own forecast in January of 410 billion yen.

Net profit nearly trebled to a record 369.4 billion yen.

Following the stellar annual results, Sony said it planned to double its dividend in the current year to 50 yen per share.

"The dividend increase sends a very positive signal about their outlook for the business," said David Gibson, analyst at Macquarie Research.

In Japan, shares in Sony closed up 1.3 percent at 4,850 yen ahead of the announcement, but are still down 22 percent since the start of 2008, underperforming a fall of 7 percent in the Tokyo stock market's electrical machinery index .IELEC.T.

Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said the market may react positively to Sony's outlook, especially since it is based on a currency rate of 100 yen to the dollar and the dollar is now at 105 yen. JPY=

"The game business is likely to drastically improve and the LCD TV business is also expected to be profitable. If Sony can accomplish these two things, it can easily lift its earnings forecasts, unless the yen starts trading around 90 yen," he said. ($1=103.76 Yen) (Additional reporting by Taiga Uranaka, Mayumi Negishi and Aiko Hayashi; Editing by Michael Watson and David Holmes)