Sony profit up, cuts forecast

By Kiyoshi Takenaka and Nathan Layne

TOKYO (Reuters) - Sony Corp, maker of PlayStation game gear and Vaio PCs, posted a small rise in quarterly operating profit and cut its outlook as weaker markets eat into its investments and a firmer yen hurts overseas sales.

Arch rival Matsushita Electric Industrial Co Ltd, the world's largest plasma TV maker, fared better, posting a 22 percent gain in quarterly profit and indicated it could beat its own annual forecast, although a slowing U.S. economy poses a big risk for both firms.

Sony enjoyed robust holiday demand for its Cyber-shot digital cameras and Handycam camcorders and managed to return its game division to profit by cutting PlayStation 3 production costs and boosting sales of its portable game machine.

But it lowered its operating profit forecast for the year to March to 410 billion yen ($3.86 billion) from 450 billion yen, citing the rising yen and the falling stock market, which has cut into the value of investments held by its life insurance unit.

The new forecast falls well short of the market consensus of 446.9 billion yen in a poll of 22 analysts by Reuters Estimates.

"The game division turning into the black is a positive," said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management.

"But the U.S. economic outlook is a cause of concern for its consumer electronics business. And compared with Sony, Matsushita looks more solid and stable."

Sony, however, edged up its full-year net profit forecast by 3 percent to 340 billion yen on the strong performance of its mobile phone joint venture with Ericsson and one-off gains from the listing of Sony Financial Holdings Inc.