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Sony stock falls after earnings report

Sony shares plunged 5 percent Friday, a day after the Japanese electronics and entertainment company reported that its losses widened in the most recent quarter.
/ Source: The Associated Press

Sony shares plunged 5 percent Friday, a day after the Japanese electronics and entertainment company reported that its losses widened in the most recent quarter.

Sony Corp. shares finished at 5,720 yen ($50), down 5.1 percent from the previous day, helping drag down the benchmark Nikkei 225 index, which fell 1.22 percent to its lowest level in a month.

The drop shows that investors are still nervous about the future at Sony, which is embarking on a cost-cutting overhaul under the helm of Howard Stringer, a Welsh-born American, the first foreigner to head Sony. The company's stock had been rising lately, gaining 50 percent over the last year on hopes for a revival.

Striving to highlight signs of recovery, Takao Yuhara, a Sony executive overseeing investor relations, pointed to improved TV sales, but stressed that the coming fiscal year will be critical in the turnaround. He acknowledged that uncertainties about Sony's game business may be behind the stock's decline.

"If we make sure we carry out our plan this year, and then I think Sony will win a better evaluation from the market," he said.

Yuhara said Sony planned to introduce a portable music player that will compete against Apple Computer Inc.'s iPod in the U.S. market within the current fiscal year through March 2007.

The player will show off Sony's "trademark strengths," such as superb sound quality, snazzy design and easy handling, he told a small group of reporters at Tokyo headquarters.

He declined to give other details but said it will link with new kinds of music download services to win over American buyers. Sony already sells Walkman digital music players but they haven't held up against the iPod, which totally dominates the U.S. market.

Sony reported Thursday that losses for the January-March quarter widened to 66.5 billion yen ($581 million), worse than the 56.5 billion yen loss it marked the same period the previous year. Massive restructuring costs, as well as research and development costs for its usually profitable game division, were behind the red ink.

Sony has a lot banking on PlayStation 3, the upgrade for the successful PlayStation 2. But Sony delayed its introduction from the initial plan in spring this year to November.

"There are real worries about the future of the PlayStation 3 business," said Mitsuhiro Osawa, an analyst with Mizuho Investors Securities in Tokyo.

He said Sony's core electronics business improved on solid sales of flat-panel TVs, digital cameras and camcorders, but the worries are over the risks in the gaming business, which requires expensive investments and isn't likely to turn profits for years.

Osawa said he has serious questions about how many buyers are ready to snatch up PlayStation 3 for the next-generation video format it supports called Blu-ray disc.

PlayStation 2 sold briskly partly because they arrived on the market at a time when many people were switching to DVDs from video cassettes.

In a bright spot, Tokyo-based Sony reported improved TV sales. New flat-panel models made in a partnership with South Korean rival Samsung Electronics Co. have helped boost sales, especially in the U.S.

Also, for the fiscal year through March, Sony turned in better earnings than it had projected. The company's annual net profit came in at 123.6 billion yen ($1 billion), well above the 70 billion yen ($609 million) profit it had forecast.

Sony also expects profit to gain slightly next fiscal year to 130 billion yen ($1.1 billion).