Sony posted a surprisingly small rise in quarterly operating profit and cut its annual forecast by 9 percent on Thursday as tumbling markets eat into its investments and a stronger yen hurts overseas sales.
Arch rival Matsushita Electric Industrial fared better, posting a 22 percent gain in quarterly profit and sticking to its forecast, although a slowing U.S. economy poses a big risk for both firms.
Sony enjoyed robust holiday demand for its Cyber-shot digital cameras, Handycam camcorders and Vaio personal computers, and managed to return its game division back to profitability by cutting PlayStation 3 production costs and boosting sales of its portable game machine.
But it lowered its forecast for operating profit in the year to March to 410 billion yen from 450 billion yen, citing the rising yen and the declining stock market, which has cut into the value of investments held by its life insurance unit.
The new forecast falls well short of the market consensus of 446.9 billion yen in a poll of 22 analysts by Reuters Estimates.
"The game division turning into the black is a positive," said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management. "But the U.S. economic outlook is a cause of concern for its consumer electronics business. And compared with Sony, Matsushita looks more solid and stable."
Sony, which vies with Samsung Electronics and Sharp in flat TVs, has shed 10,000 jobs and a wide range of non-core assets over the past few years in a turnaround effort led by Chief Executive Howard Stringer.
Tokyo-based Sony said last year it would sell its production facilities for making key microchips used in the PS3 to Toshiba and stop making rear-projection TVs, once seen as a promising rival of LCD and plasma models.
But tumbling prices of LCD TVs and other key products have cut into its earnings. Sony's core electronics division saw its operating income fall 7 percent in the October-December quarter, also hurt by lower sales of semiconductors to the game division.
Sony said it was worried that demand in the United States could be hit by the effects of the subprime mortgage loan crisis.
"We have seen no sign of demand weakening in the U.S. due to the subprime loan problems, but we expect there to be a gradual impact from here on," Sony Chief Financial Officer Nobuyuki Oneda told a news conference.
Sony's operating profit for October-December came to 189.36 billion yen, up 5.9 percent from 178.91 billion yen in the same quarter a year earlier, though far below the average estimate of 245.5 billion yen from four analysts.
On a net basis, profit rose 25 percent to 200.22 billion yen.
Panasonic maker Matsushita, meanwhile, said its operating profit came to 165.4 billion yen in October-December, up from 135.83 billion yen a year earlier, helped by brisk demand for its digital cameras and flat televisions.
Matsushita has been weathering slowing growth in the plasma TV market relatively well because its hefty output capacity helps it cut production costs, and it stood by its forecast for profit to rise 4 percent to 477 billion yen in the full year to March.
Prior to the announcement, shares in Sony closed up 3.6 percent at 5,220 yen, outperforming the Tokyo stock market's electrical machinery index, which rose 2.7 percent. Matsushita soared 8.7 percent to 2,250 yen ahead of its results.
Sony shares have fallen 10 percent since October, while the sub-index has tumbled 21 percent. Matsushita shares had slid 4 percent since October before Thursday's jump.