UPDATE 3-Sony shares slide as investors look beyond cost cuts

* Shares lost 6.8 pct, the largest fall in a year

* Annual operating profit forecast misses consensus by 23 pct

* Euro,lack of hit products capping share gain-fund managers

* Stringer should stay, reform slower w/out him-fund managers

By Kiyoshi Takenaka

TOKYO, May 14 (BestGrowthStock) – Sony Corp (6758.T: ) shares fell
nearly 7 percent in their biggest tumble in a year after the
electronics maker disappointed investors with a cautious forecast
and worries mounted the euro could dull the pace of its recovery.

Sony, which once ruled the game and electronics industries
with the PlayStation console, Walkman music player and Trinitron
TV, is also struggling to regain its reputation as an innovator
of hit products, clouding its long-term prospects.

Chief Executive Howard Stringer receives high marks from
investors for cutting much of the fat out of the sprawling
conglomerate through a series of major restructurings since the
former journalist took the top job in 2005.

But it has fallen behind Apple (AAPL.O: ) in portable music
players and Nintendo (7974.OS: ) in video games, while Samsung
Electronics (005930.KS: ) is in a different league in terms of
profitability. The South Korean rival’s operating margin was 8
percent last year, four times Sony’s forecast for this year.

“It seems to me they’re barely managing to keep up,” said
Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset
Management. “In the past they often developed new products with
which to compete.. but at this point it seems they’re just sort
of making one product after another.”

Sony returned to profit last year by shedding jobs, shutting
plants and cutting procurement costs, and expects a fivefold jump
in operating profit to 160 billion yen ($1.7 billion) this year,
though that was a quarter below what the market was expecting.

Sony Chief Financial Officer Nobuyuki Oneda said that the
potential impact of Greece’s debt problems had not really been
factored into its forecast. Another worry is a weaker euro, given
Sony gets about a quarter of its sales from Europe.

The euro was trading at 115.94 yen (EURJPY=: ) on Friday, while
Sony’s earnings forecast, announced on Thursday, was based on an
assumed euro/yen rate of 125 yen. A one yen appreciation against
the euro reduces Sony’s annual operating proift by 7 billion yen.

“There’s just no way to tell which direction the euro will go
from here. Under the circumstances, we cannot just chase Sony
higher on hopes of continued earnings expansion,” said Mitsushige
Akino, chief fund manager at Ichiyoshi Investment Management.


Sony fell 6.8 percent to 2,950 yen on Friday, the sharpest
percentage fall since last May and underperforming a 2.3 percent
fall in the electrical machinery index (.IELEC.T: ). Sony volume
spiked to 23 million shares, nearly four times the average over
the past month.

The sharp slide amid heavy volume suggests some investors are
skeptical of Sony’s ability to switch gears and capitalise on
growth opportunities, rather than growing profits mainly through

Chief Executive Howard Stringer believes the arrival of 3D
film and television will likely play to Sony’s strengths as both
an electronics and entertainment company with a wide business
portfolio that ranges from movies to theatre-use projectors.

Sony plans to offer 3D TVs and 3D-ready games in June. But it
will be a few months behind Samsung and Panasonic Corp (6752.T: )
in bringing 3D TVs to market, and the earnings impact should be
limited over the near term.

Friday’s tumble, however, should not be viewed as a call from
the stock market for Stringer’s departure, fund managers said.

Stringer, a native of Wales and one of the few non-Japanese
to head a major Japanese company, has worked hard to break down
the barriers among various business groups within the company.

That effort, carried out under the “Sony United” slogan,
helped ensure victory in the high-definition disc format war with
Toshiba Corp (6502.T: ), when Sony’s game, movie and electronics
divisions threw their weight behind Blu-ray technology.

“He has been doing the right thing and his strategy and
direction should be commended. I believe the market would like
him to take care of Sony a while longer,” said Naoki Fujiwara,
fund manager at Shinkin Asset Management.

Although Stringer has not always managed to make drastic
change at Sony, the pace of change would have been considerably
slower under a Japanese boss, Ichiyoshi’s Akino said.

Stock Market Research

(Additional reporting Aiko Hayashi, Sachi Izumi and Elaine
Lies; Editing by Chris Gallagher and Nathan Layne)

UPDATE 3-Sony shares slide as investors look beyond cost cuts