Sony shares plunge after earnings forecast cut

Sony lost $2.2 billion in market value today after chief executive Kazuo Hirai cut his earnings forecast and posted a loss because of stalling demand for Bravia TVs, Cyber-shot cameras and Hollywood movies.

The stock slumped 11 per cent in Tokyo trading, the biggest drop in five years, after Mr Hirai slashed his full-year net income projection by 40 per cent to 30 billion yen ($305 million).

Sony also unexpectedly posted a second-quarter loss, missing analyst estimates for a return to profit.

Mr Hirai, who took over amid four straight annual losses, cut jobs and emphasized digital imaging, games and mobile devices in an effort to win back sales from Apple and Samsung . Instead, he lowered annual projections yesterday for TVs, cameras, personal computers and video recorders as Sony’s film unit lost money.

Even with Japan’s weaker yen, five of Sony’s nine divisions posted operating losses in the second quarter.

The company, which rejected investor Daniel Loeb’s push for a partial sale of its entertainment assets, is trying to recover from flops that prompted criticism from the billionaire.

Sony fell to 1,668 yen in Tokyo, narrowing this year’s gain to 74 per cent, after the stock was cut to hold from buy by Jefferies LLC analyst Atul Goyal.

Competitor Panasonic , which doubled its forecast yesterday after paring phone and TV operations, surged 6.2 per cent.

Sony's film studio stumbled in the summer box-office season that runs from May to early September. Big-budget tentpoles After Earth, with Will Smith, and White House Down, with Channing Tatum and Jamie Foxx, failed to connect with audiences. Recent releases Captain Phillips and Cloudy With a Chance of Meatballs 2 have been well-received by audiences and critics.

Last month, subscription-streaming service Netflix ordered a 13-episode series from Sony Pictures Television, by the creators of the drama Damages.

Sony’s net loss totaled 19.3 billion yen in the three months ended September 30th.

The company needs to cut costs and undertake “more aggressive reform” of its product portfolio and entertainment business, Fitch Ratings said in a statement. Sony’s BB- credit rating, which is three levels below investment grade, may be downgraded, it said.

Bloomberg