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Sony Shares Hit Five-Year High on Bullish Outlook


Shares of Sony jumped to a five-year high on Thursday after the electronics maker forecast a six-fold jump in annual profit on sales of LCD TVs and expectations for smaller losses in its game division.

Sony's stock closed the session up 2.6% at 6,630 yen after climbing as high as 6,750 yen, a level last seen in June 2002. The Nikkei 225 Average closed just slightly lower.

The Japanese electronics and entertainment conglomerate was hit hard last year by massive costs to launch its PlayStation 3 (PS3) game machine, and recall 9.6 million units of its laptop PC batteries, which in rare cases could catch fire from overheating.

But profits in its core electronics division improved sharply thanks to a weak yen and healthy sales of key products like its Bravia brand liquid crystal display TVs and Cyber-shot cameras, helping cushion the blow of the game unit's $1.9 billion loss.

Sony forecast operating profit of 440 billion yen (US$3.7 billion) for the year to March 2008, up from 71.8 billion yen in 2006/07 and above the market consensus of 378 billion yen, though Sony's estimate includes a 59 billion yen gain on a land sale.

Even after discounting one-time gains, the forecast still came in above market expectations, said Deutsche Securities analyst Yasuo Nakane, who kept his "buy" rating on Sony and target price of 7,100 yen.

"Following disappointing forecasts from companies like Funai and Casio, markets are simply relieved to find Sony meeting expectations," Nakane said.

Sony said it expects its game division to remain in the red this year, although it aims to nearly double shipments of the PlayStation 3, as more shoppers opted for rival Nintendo's cheaper Wii console.

Sony also told reporters on Thursday it expects sales at its main electronics unit to rise 4% to 6% the year to next March from a year earlier.

The company aims to hit a 5% operating profit margin this year, but that's largely possible because of one-time factors like the land sale, said Mizuho Securities analyst Koichi Hariya. Hariya said he does not plan to change his estimate for the year ending March 2009.

Among analysts bullish on the stock, Merrill Lynch also reiterated its "buy" rating, Credit Suisse reiterated its "outperform" rating, and UBS reiterated its "neutral" rating on the shares.

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