Sony to post growth, Matsushita downbeat

TOKYO, Japan -- Defying a succession of downward earnings revisions in Japan's electronics sector, industry leader Sony Corp. is expected to post a surge in its operating profit in the year to March 2003.

But this piece of encouraging news could not be taken as a sign that the crippling info-tech slump is nearing its end, especially since other Japanese electronics makers, including Matsushita Electric Industrial Co Ltd is predicted to post grim profit results.

The Japanese Nihon Keizai Shimbun daily reported on Tuesday Sony's operating profit is expected to double in the year to March 2003.

But the report is in stark contrast to a series of dim profit news from other Japanese electronics makers, including Matsushita Electric Industrial Co Ltd, maker of Panasonic goods.

Sony is expecting a surge in earnings as restructuring winds down, PlayStation 2 investments pay off, and weak yen aid overseas earnings, the newspaper said.

Without citing sources, the business daily said Sony's consolidated operating profit would likely bounce to back to 270 billion yen ($2 billion).

The figure is the highest level in four years and more than double the company's own forecast of 130 billion yen for the current fiscal year through March.

However, a Sony spokesman dismissed the numbers as speculation, adding that the company would disclose its 2002/03 forecasts when it reports 2001/02 results in late April.

"We have not disclosed anything on the next fiscal year," the spokesman told Reuters news agency.

Good news

Despite the Tokyo market downtrend, shares in Sony managed to end nearly two percent higher at 6,150 on the back of the report.

Sony shares have risen nearly 60 percent from lows hit in the wake of the September 11 attacks,

The newspaper attributed the substantial gain to strong sales of Sony brand goods and PlayStation 2 game console in the pre-Christmas season.

The smash-hit PlayStation 2 game console, which finally moved into the black in the first half of this business year, was expected to post operating profits of more than 10 billion yen for 2002/03, the daily said.

It added that the company would benefit after it stepped accelerate its restructuring plan, which brought forward into the current fiscal year some of the job cuts that had been planned further down the road.

And while Sony's 2002/03 consolidated revenue was expected to grow only a few percent from this year's projected 7.55 trillion yen, the Nihon Kezai said Sony will be cleared of restructuring costs that erased around 110 billion yen from profits in its electronics division this fiscal year.

Bad news

Despite the encouraging news, the info-tech sector is bracing for bad news this week from Matsushita, which is expected to prompt another earnings warning due to a dull domestic economy

Analysts said Matsushita, which in November forecast a massive net loss of 265 billion yen ($2 billion) for the year through March, would likely raise its red-ink projections when it releases quarterly results on Thursday.

Merril Lynch analyst Hitoshi Kuriyama told Reuters he expects Matsushita's operating loss for the October-December quarter to exceed 50 billion yen from 75.7 billion yen in the half-year to October 31.

For the full year through March, he said Matsushita's consolidated loss could rise to 200-220 billion yen on an operating basis, versus a November forecast of 160 billion yen.

But Kuriyama said he expects the firm's net loss to balloon to 320-330 billion yen.

Currency swings

The yen's slide has brought an added boost for Sony, which earns 70 percent of its revenues abroad.

A weaker yen increases that value of overseas earnings when they are converted into the Japanese currency.

But analysts said currency swings could provide little solace for Matsushita, which gets about half its revenues from overseas markets.

Analysts further noted Matsushita also lacks the entertainment operations, especially video games, which buoyed Sony's earnings.

Sony's successful foray into video games pushed its revenues for the half-year through October past Matsushita, previously the world's largest consumer electronics maker.

Compared to Sony's nearly 60 percent growth in shares, Matsushita has only risen a modest 13.7 percent from a six-year low in the aftermath of the September 11 attacks.

The info-tech slump dealt a particularly severe blow to Matsushita's electronic parts operations.

But the group was severely affected by product launch delays and recalls at Matsushita Communication Industrial Co Ltd, a subsidiary that is Japan's second-largest mobile phone maker.

Matsushita Communication and four other subsidiaries will be absorbed into the parent company by October, which analysts said could bring additional factory closures and job cuts to boost efficiency.

Ten thousand Matsushita employees, mostly in manufacturing, opted for early retirement last year as part of an effort to slim down operations.

Matsushita, which has lost its leadership position in Japan's cellphone market to rival NEC Crop, has vowed to make a comeback next year by expanding its domestic market shares to 27 percent from the current 17 to 18 percent.

Shares of Matsushita dropped 2.53 percent at 1,550 yen on Friday, while shares of Sony Corp rose 1.82 percent at 6,150 yen.