UPDATE 1-Moody's cuts Sony credit rating, outlook negative

* Sony follows NEC, Toshiba in getting Moody's downgrade

* Operating profit margin eyed for further rating action

* Shares close up 0.4 pct following rating cut

TOKYO, May 27 (Reuters) - Credit rating agency Moody's cut Sony Corp's (6758.T) long-term ratings on Wednesday and said the rating outlook was negative, citing slowing growth, price declines and a strong yen.

Sony, which has forecast a second straight year of annual losses and announced aggressive restructuring plans, follows other high-tech exporters Toshiba Corp (6502.T) and NEC Corp (6701.T) in being hit with a credit rating downgrade.

Moody's cut Sony to an A3 from A2, saying that the global economic crisis may make it difficult for the Japanese electronics giant to boost sales and profit margins of its high-end products.

"Major electronics products have been commoditized to a large extent, and there is limited room for technological innovation," it said in a statement.

"Furthermore, Sony will continue to find it a considerable challenge to minimize the impact of exchange rates on its cost competitiveness and profitability, as a significant amount of sales are generated overseas," Moody's said.

Sony, the maker of Vaio computers, Bravia flat TVs and PlayStation game consoles, earns three quarters of its revenues overseas.

But J.P.Morgan analyst Yoshiharu Izumi said Sony's earnings are on a solid recovery path, adding that while core operating income was set to be a loss this financial year, that was mainly due to restructuring charges.

"U.S. consumer confidence is recovering sharply and since Sony's earnings outlook was compiled when consumer sentiment was near the bottom, it is highly likely that its forecasts are based on a worse-case scenario," he said, adding that he did not expect Moody's action to affect Sony's share price.

Data on Tuesday showed U.S. consumer confidence soared in May to its highest level in eight months, boosting hopes for a rebound in the global economy.

Sony expects an operating loss of 110 billion yen ($1.2 billion) in the year to March, roughly half of its 227.8 billion yen loss a year earlier. [ID:nT305312]

Moody's said it would lower Sony's rating further if there was not significant improvement in its operating profit margin.

"If Sony cannot raise its adjusted operating profit margin to more than 2 percent over the next few years, or if it cannot keep its debt to capitalization below 50 percent, the rating would be downgraded," it said.

Sony is aiming for an operating margin of 0.4 percent for the year to March 2010, excluding restructuring expenses and equity income.

Its adjusted debt to capitalization ratio is estimated at less than 40 percent as of the end of March, Moody's said.

Shortly after the ratings downgrade, shares of Sony closed up 0.4 percent at 2,475 yen, underperforming a 1.1 percent rise in Tokyo's electrical machinery index .IELEC.T. (Reporting by Mayumi Negishi and Kiyoshi Takenaka; Editing by Edwina Gibbs)