* Sony Q1 operating profit tumbles 77 pct on year
* Quarterly net loss swells, cites FX, weak economies
* Cuts unit sales forecast for PSP, PS Vita, TVs
* Maintains outlook for PlayStation sales
* Sharp reports operating loss, plans first job cuts since WW2
By Tim Kelly
TOKYO, Aug 2 (Reuters) - Sony Corp slashed its forecast for 2012/13 operating profit and lowered its sales expectations for key products including its handheld PSP and PS Vita devices as new boss Kazuo Hirai battles to revive the fortunes of the electronics giant.
Sony said April-June operating profit fell a much steeper-than-expected 77 percent to 6.28 billion yen ($80 million) compared with a year earlier, blaming a strong yen and weak economies. Analysts had pencilled in a 36 percent fall.
Rival Sharp Corp announced a 94 billion yen operating loss ($1.2 billion) for the June quarter and plans its first job cuts in more than 60 years as Japan's electronics industry scrambles to keep up with foreign competitors.
Sony shares hit a 32-year low in July on waning investor confidence it will be able to close the gap with the likes of Apple Inc, Samsung Electronics Co Ltd and Microsoft Corp.
"I think they're in a pretty difficult position," said Yuuki Sakurai, CEO of Fukoku Capital Management, the asset management unit of Japan's Fukoku Mutual Life Insurance.
"If they don't clearly show what is going to change under the new management I think the market will crush the stock again."
In the latest sign of that struggle, Sony cut some projections for product sales for the year to March 2013.
The firm said it expected to shift 15.5 million TVs, down from a May projection of 17.5 million. It projected PSP and PS Vita handheld device sales of 12 million, down from 16 million, but maintained a forecast of 16 million sales for the PlayStation games console.
Sony hacked its 2012/13 operating profit forecast back to 130 billion yen from a previous forecast of 180 billion yen, moving more into line with market thinking. The consensus forecast of 18 analysts surveyed by Thomson Reuters is for annual operating profit of 139 billion yen.
Taking the helm at Sony in April, Hirai vowed to revive the fortunes of the maker of the Walkman music player after years of competition from foreign rivals overturned its dominance in consumer electronics. The steady slide in Sony shares has left the Japanese firm with a market capitalisation of $12.4 billion, about a 15th of the size of Samsung.
After Sony returned a record net loss of 455 billion yen for the last fiscal year to March 31, Hirai promised 10,000 job cuts and big cost reductions in the TV unit that has produced losses amounting to about $12 billion in the past decade.
It took an 11.3 billion yen restructuring charge in the June quarter. In April, Hirai projected total restructuring charges of some 75 billion yen for 2012/13.
Hirai now faces the added challenge of steering his limping corporation through a euro zone debt crisis that is denting global demand for consumer electronics and eroding the profitability of Sony products.
The corporation said the U.S. economy was also sluggish and that growth in the so-called BRICS -- Brazil, Russia, India, China and South Africa -- had been slower than expected.
Like other Japanese exporters, including Nissan Motor Corp , Sony cited the strength of the yen as a factor weighing on its results. The currency has become a safe-haven for many investors as debt concerns undermine confidence in both the euro and the dollar.
The evaporating value of the euro hurts all Japanese companies that sell their goods and services in Europe, but Sony is more sensitive to yen swings against the common currency than its local peers.
Sony's European sales account for a fifth of all revenue compared with a tenth at both Panasonic Corp and Sharp.
A one-yen gain in the exchange rate against the euro cuts 6 billion yen off of Sony's operating profit. For Panasonic, a similar change would cut only 2.5 billion yen, and for Sharp, no more than 500 million yen.
The average against the dollar during the first quarter was 80.1 yen with the euro at 102.9 yen. The euro since has eroded in value to its lowest in more than a decade to around 95 yen.
Sony said it was now assuming a yen rate of 100 per euro in its foreign exchange projections for the year, against a May view that the rate would be around 105 yen.
It kept to a dollar/yen assumption of 80 yen.
In April, Hirai outlined a revival plan that stakes Sony's future on mobile devices such as the Xperia smartphone, gaming and digital imaging, while developing new businesses, including a medical unit.
So far, however, he has failed to convince investors a turnaround is imminent for the company behind the Bravia TV and Vaio laptop brands. Since he moved into the CEO office, Sony's shares have tanked by more than two-fifths.
However, Tetsuro Ii, CEO of Commons Asset Management, said it will take time for Hirai to start turning Sony around.
"He has to really revolutionise the company and although I recognise the importance of speed, you can't have a revolution in a day," Ii said.
The loss posted by Sharp, Japan's last big maker of liquid crystal displays for TVs, was much deeper than the 44.4 billion yen shortfall that had been expected by analysts.
The maker of the Aquos TV brand said it would cut about 5,000 people -- about one-tenth of its workforce -- as it struggles, like Sony, with weakening global demand for TVs and competition from rivals led by Samsung.
Sharp President Takashi Okuda said they would be the firm's first job cuts since the economic confusion that followed Japan's defeat in World War Two, adding to several announcements this year from Japanese companies reducing the size of its workforce.
"We are in a really tough situation," Okuda said at a press briefing in Tokyo. "We will restructure and speed up our decision making."