Sony shares plunge as investors question TV revival

TOKYO Shares in Sony Corp (6758.T) fell nearly 10 percent on Friday as investors questioned whether the Japanese firm can successfully turn around its loss-making TV business after it warned the unit is set to lose $2.2 billion.

Sony shocked investors on Wednesday by warning of a fourth consecutive year of losses, further denting confidence in a firm that was once a symbol of Japan's high-tech might.

The company offered few details of its plan to halve losses from its TV division, which itself is headed for its eighth consecutive annual loss. Sony hopes to trim the loss next year and drag the division into the black by March 2014.

"After its weak earnings and forecast and in light of the impact of the Thai floods and the still-strong yen, it's impossible to be optimistic about Sony right now and it's easy to sell it," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"There are no reasons to buy Sony shares and lots of good reasons to sell them."

Barclays analyst Yuji Fujimori cut his rating on the stock to equal weight from overweight, and the target price to 1,600 yen from 2,500 yen, saying profit forecasts had been slashed further than he expected and that restructuring in televisions had slowed down.

Shares in Sony shares closed down 7.9 percent at 1,400 yen, after falling as much as 8.8 percent earlier in the session to the lowest level in a month. Thursday was public holiday in Japan.

The maker of Bravia TVs, Vaio computers and PlayStation game consoles cut its sales forecast for TVs, cameras and DVD players on Wednesday and said it may report a 90 billion yen ($1.1 billion) net loss for the current fiscal year, scrapping its earlier net profit estimate of 60 billion yen.

It expects its TV division to report a 175 billion yen loss this financial year, including a 50 billion yen impairment charge.

"With the exception of the reductions to SG&A (selling, general and administrative) costs, we find it hard to factor in the achievement of these (TV profit) goals," Nomura analyst Shiro Mikoshiba said in a note after the results were announced.

"We think fixed-cost reductions of nearly 300 billion yen are needed to improve earnings at the TV business and that the proposed restructuring is not consistent with such a reduction. We think the company faces a thorny path as even if it tries to cut fixed costs it will be difficult to actually do so."

The warning by Sony illustrates its diminished standing in the technology world. Back when Sony was led by co-founder Akio Morita and it launched the iconic Walkman, it was an inspiration to the founders of a then-little-known start-up company called Apple Computers (AAPL.O).

Now Sony, led by its Welsh-born chairman and CEO, Howard Stringer, is struggling to create hit devices and finds itself outmaneuvered in TVs by Samsung Electronics Co (005930.KS) and in the booming smartphone market by Apple.

STRINGER YEARS

Under Stringer, who said in March he was happy to stay in his job for another year but was unsure about his plans beyond that, Sony has succeeded in restructuring to some extent.

Sony has sold off overseas TV plants and outsourced more than half of its production to companies such as Hon Han Precision Industry. But Stringer has failed to make the business profitable.

The New York Post reported on Thursday that Stringer may resign as CEO by March next year.

Sony declined to comment.

Shares in Sony have fallen more than 60 percent since Stringer became chairman on June 22, 2005, while Samsung shares have nearly doubled during the same period.

Sony's Kazuo Hirai, who was appointed to the company's No.2 position this year, must map out a plan for earnings growth if he is to take over the top job from Stringer, analysts said.

His rare appearance at an earnings conference on Wednesday did not reassure investors and instead dashed hopes that the once-stellar brand is at last coming to grips with its struggling TV business and can challenge its rivals in the smartphone arena.

($1 = 77.980 Japanese yen)

(Writing by Miyoung Kim; Editing by Dean Yates and Matt Driskill)