Sony shares slide 7 percent as earnings disappoint

TOKYO (Reuters) - Shares of Sony Corp 6758.T fell nearly 7 percent on Friday after the electronics maker posted a surprisingly small rise in quarterly operating profit and cut its outlook on a fall in the value of securities and a firmer yen.

The earnings report prompted HSBC to cut its rating on Sony to “neutral” from “overweight”, citing the risk that a weakening U.S. economy and the strengthening yen could sap future profits at the maker of PlayStation 3 game consoles and Vaio PCs.

Shares of Sony were down 6.9 percent at 4,860 yen as of 0136, underperforming a 0.8 percent fall in the benchmark Nikkei average. Sony’s stock has lost 21 percent so far in 2008, while the Nikkei has shed 12 percent.

Sony reported a 6 percent rise in group operating profit for the October-December quarter to 189.36 billion yen, but that fell far short of the average estimate of 245.5 billion yen from four analysts polled by Reuters Estimates.

It 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 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.

Still, some market players saw opportunity in the stock fall.

“Investors appear to be overselling Sony,” said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments.

“Maybe this presents a buying opportunity for the stock as, if you take a step back and see, Sony has started making profits on its game business.”

Reporting by Taiga Uranaka and Nathan Layne; Editing by Hugh Lawson