Sony shares tumble after profit slide shock

By Staff and wire reports

TOKYO, Japan (CNN) -- Sony shares nose-dived 11 percent on Friday morning after the consumer electronics giant posted a startling slide in earnings for the June quarter.

Shares dropped to 6250 yen in early trade, their lowest levels in over two years, before recovering slightly to 6300 yen.

On Thursday, Sony reported a more than 90 percent slide in earnings for the April-June period, a victim of the slowing global economy.

Negative surprise

Group operating profit tumbled to $24.27 million in the quarter -- far below analysts' expectations of between $211 million and $300 million. profit in the same quarter a year ago was $248.3 million a year ago.

Sales rose 4.4 percent year-on-year to reach $13.3 billion.

On a net basis, the electronics giant saw a loss of $244 million, compared to a loss of $749.6 million in the same quarter a year ago.

The results drew negative reaction from the analyst community.

"It's pretty much a disappointing result," WestLB Panmure's electronics component analyst Hiromi Okada told CNN.

"There is a possibility for downward revision of their earnings estimate later this year, so the stock can go down further."

Merrill Lynch's Hitoshi Kuriyama cut his intermediate-term investment rating on the company to "neutral" from "buy."

"This performance came as a negative surprise and can be attributed to a substantially larger-than expected slowdown in the demand for electronic products," Kuriyama wrote in a report to clients.

"Yen depreciation benefits and a recovery in game content earnings were not enough to offset this slowdown."

More disappointment

For the full business year to March 2002, Sony sharply cut its earnings forecast.

The company now expects group net profit to be $729.8 million, compared with its April forecast of $1.2 billion.

Group operating profit is expected to come in at $2 billion, compared with Sony's April forecast of $2.4 billion.

Analysts say the company is also likely to be affected by sluggish PlayStation 2 game console sales, especially when competition heats up in the northern autumn with the appearance of rival consoles from Nintendo and Microsoft.

But the company has yet to announce its revised earnings forecast for its PS2 game machine.

"With Sony, it's obvious that the electronics sector is very bad. But they don't want to convey that and that's why they want to hold their earnings projection for PS2," said Okada.

The market will be bracing for further disappointment from the IT sector on Friday afternoon, when two of Japan's chip making conglomerates, NEC and Fujitsu, issue quarterly earnings reports.

Reuters contributed to this report.