Sony Q1 profit down on mobiles, Matsushita up

TOKYO (Reuters) - Sony Corp (6758.T) posted a bigger-than-expected 47 percent fall in quarterly profit and cut its outlook, hurt by its struggling mobile phone joint venture with Sweden's Ericsson (ERICb.ST), while rival Matsushita (6752.T) nearly doubled its profit on rising flat TV sales.

Sony lowered its group net profit forecast for the year to March by 17 percent, citing the slump at Sony Ericsson and weakening prospects for its electronics division as rivals try to undercut its Cyber-shot digital cameras and Vaio PCs on price.

"On digital cameras and camcorders, growth in developed markets such as Europe and the United States slowed and competition intensified, resulting in smaller profits," Sony Senior Vice President Naofumi Hara told a news conference.

Matsushita Electric Industrial Co Ltd, the maker of Panasonic products, in contrast, kept its outlook above market expectations as it cashes in on strong demand for its Viera flat TVs.

Asked about media reports that Sony is in talks to buy the 50 percent it does not own in Sony BMG Music Entertainment from Germany's Bertelsmann BERT.UL, Sony Chief Financial Officer Nobuyuki Oneda said nothing concrete has been decided, indicating the two are negotiating on Sony BMG stakes.

The Financial Times reported in June that Bertelsmann is seeking $1.2 billion to $1.5 billion to pull out of Sony BMG, while the Nikkei business said on Tuesday the sale price for the 50 percent stake is expected to be in excess of 100 billion yen ($931 million).

SEVERE STATE

The U.S. economic slowdown, higher raw materials prices and a firmer yen have been slicing into the profitability of Japanese exporters. But analysts said Sony is being hit particularly hard.

"Overall, Sony's earnings gave me the impression that the company is in a severe state," Daiwa Institute Research analyst Kazuharu Miura said. "The electronics division seems to be in a particularly tough situation, hit by sharp price falls."

Net profit at Sony came to 35 billion yen in April-June, down from 66.5 billion yen a year earlier and below the average estimate of 52.5 billion yen from three analysts polled by Reuters Estimates. Sales rose 0.1 percent to 1.98 trillion yen.

Bucking the trend, Matsushita reported a 86 percent rise in quarterly net profit to a record 73 billion yen.

Matsushita reiterated its forecast for net profit to rise 10 percent to 310 billion yen in the year to March, against the market consensus of 300 billion yen. Sony cut its forecast by 50 billion yen to 240 billion yen, well below the consensus estimate of 278.5 billion yen.

Nobuo Kurahashi, an analyst at Mizuho Investors Securities, said investors have been bracing for a set of weak numbers after Sony Ericsson reported its earnings earlier this month, but may still sell Sony's stock.

"The profit warning will likely have a negative impact on Sony shares tomorrow," Kurahashi said.

NEW EARNINGS DRAG

The electronics and entertainment conglomerate, fresh from its victory over Toshiba Corp (6502.T) in the high-definition DVD format battle, is aiming to turn around its TV and video game operations, which have been Sony's two major earnings drags.

The company currently trails Samsung Electronics Co Ltd (005930.KS) in liquid crystal display (LCD) TVs and lags Nintendo Co Ltd (7974.OS) in video game consoles.

Sony's Oneda said TV demand in China has been slower than expected ahead of the Beijing Olympics due partly to the Sichuan province earthquake in May.

The maker of Bravia flat TVs, however, managed to improve profitability on LCD TVs in the latest quarter and turned its game division profitable on lower manufacturing costs for the PlayStation 3 and higher sales of PS3 games.

Its pictures division slipped to a loss due to the lack of a hit movie like Spider-Man 3 in the same quarter last year. Sony Ericsson was another big negative, posting a quarterly operating loss as demand for its more expensive phones sagged.

"Games have recovered well. That's positive. But movies aren't good. Then Sony Ericsson is really a drag," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

Prior to the announcement, shares in Sony closed down 3.2 percent at 4,210 yen, while Matsushita slipped 0.2 percent to 2,180 yen. The Tokyo stock market's electrical machinery index .IELEC.T dropped 2.1 percent.

(Editing by Malcolm Whittaker, Paul Bolding)