Sony posted a bigger-than-expected 47 percent fall in quarterly profit and cut its outlook, hurt by its struggling mobile phone joint venture with Sweden's Ericsson while rival Matsushita nearly doubled its profit on rising flat TV sales.
Sony lowered its group net profit forecast for the year to March by 17 percent, citing the slump at Sony Ericsson and weakening prospects for its electronics division as rivals try to undercut its Cyber-shot digital cameras and Vaio PCs on price.
Matsushita Electric Industrial, in contrast, kept its annual outlook above market expectations as it cashes in on strong demand for its Panasonic brand plasma TVs ahead of the Beijing Olympic Games.
The U.S. economic slowdown, the yen's appreciation and higher fuel and raw materials prices have been slicing into the profitability of most Japanese exporters.
But analysts said Sony is being hit particularly hard.
"Overall, Sony's earnings gave me the impression that the company is in a severe state," Daiwa Institute Research analyst Kazuharu Miura.
"The electronics division seems to be in a particularly tough situation, hit by sharp price falls."
Net profit at Sony came to 35 billion yen ($326 million) in April-June, down from 66.5 billion yen a year earlier and below the average estimate of 52.5 billion yen from three analysts polled by Reuters Estimates.
Sales rose 0.1 percent to 1.98 trillion yen.
Canon, another Japanese high-tech exporter that competes with Sony in digital cameras, said last week its operating profit fell 12 percent in the latest quarter due to a stronger yen and weak copier demand.
Bucking the trend, Matsushita reported a 86 percent rise in quarterly net profit to 73 billion yen.
Matsushita reiterated its forecast for net profit to rise 10 percent to 310 billion yen in the year to March, against the market consensus of 300 billion yen.
Sony cut its forecast by 50 billion yen to 240 billion yen, well below the consensus estimate of 278.5 billion yen.
Nobuo Kurahashi, an analyst at Mizuho Investors Securities, said investors have been bracing for a set of weak numbers after Sony Ericsson reported its earnings earlier this month, but may still sell Sony's stock.
"The profit warning will likely have a negative impact on Sony shares tomorrow," Kurahashi said.
The electronics and entertainment conglomerate, fresh from its victory over Toshiba in the high-definition DVD format battle, is aiming to turn around its TV and video game operations, which have been Sony's two major earnings drags.
Sony said profitability on liquid crystal display (LCD) TVs improved in the latest quarter and that it had succeeded in getting its game division into the black on lower manufacturing costs for the PlayStation 3 and higher sales of PS3 games.
But its pictures division slipped to a loss due to the lack of a hit movie like Spider-Man 3 in the same quarter last year.
Sony Ericsson was another big negative, posting a quarterly operating loss as demand for its more expensive phones sagged.
"Games have recovered well -- that's positive. But movies aren't good. Then Sony Ericsson is really a drag," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
Sony revised up its operating profit forecast for the year to March to 470 billion yen from 450 billion yen to account for a new accounting method.
That is above a consensus of 445.7 billion yen in a poll of 17 analysts by Reuters Estimates.
Under the new accounting procedure, profits and losses from its equity-method companies, or companies in which Sony has stakes of between 20 to 50 percent, are now included in group operating profit.
The new operating estimate is effectively a downward revision as Sony recalculated its previous forecast, unveiled in May, to 520 billion yen from 450 billion yen to reflect the accounting change.
Sony currently trails Samsung in liquid crystal display TVs and lags Nintendo in video game consoles.
Matsushita kept unchanged its operating profit forecast of 560 billion yen for the year to March, exceeding a consensus estimate of 548.1 billion yen by 19 analysts polled by Reuters.
Matsushita, which makes Viera flat TVs and Lumix digital cameras, is set to change its name to Panasonic on Oct 1.
Prior to the announcement, shares in Sony closed down 3.2 percent at 4,210 yen, while Matsushita slipped 0.2 percent to 2,180 yen.
The Tokyo stock market's electrical machinery index IELEC.dropped 2.1 percent.