Sony Earnings Disappoint Wall St.

Investors hammered Japanese electronics and entertainment giant Sony Corp. on Thursday after the company stunned investors with unexpectedly poor earnings as the slowing global economy cut demand for products such as TVs and mobile phones.

After being converted into dollars, Sony’s results showed a net loss of $243 million for its fiscal first quarter ended June 30. Sony’s operating income plunged 90% during the quarter to just $24 million.

Analysts had been expecting Sony to be in the black by more than $100 million for the quarter. After the announcement, investors in the U.S. drove down the price of Sony’s American depositary receipts by $5.95, or more than 10%, to $51.86 on the New York Stock Exchange.

“This performance came as a negative surprise and can be attributed to a substantially larger-than-expected slowdown in the demand for electronics products,” Merrill Lynch & Co. analyst Hitoshi Kuriyama wrote in a report to clients.

Kuriyama cut the company’s rating from “accumulate” to “neutral.” He also said Sony had lowered the outlook for its fiscal year results “by a hefty margin.”

Sony’s lackluster results largely reflect the softer global economy, which is hurting a wide array of consumer and electronics companies in the U.S. and abroad.

On Thursday, Hewlett-Packard Co. said it is slashing 6,000 jobs because of slow computer and printer sales. Compaq Computer Corp. this week announced a sharp downturn as well.

Results were slightly better for Sony’s entertainment businesses, which include its Culver City-based studio with its Columbia Pictures unit as well as its New York-based Sony Music operation.

The company’s studio narrowed its operating losses to $22 million--about half of what it was a year earlier--in part because of the hit film “Crouching Tiger, Hidden Dragon,” box-office results from “Vertical Limit” and an extended licensing agreement for the TV game show “Wheel of Fortune.”

But Sony said offsetting those results were higher marketing costs for upcoming films, along with higher expenses for fledgling digital entertainment ventures.

Sony’s music group posted a $36-million operating profit, thanks largely to sales from such artists as Destiny’s Child, Jessica Simpson and Travis. In the U.S., however, the operation recorded an operating loss--albeit a lower one than a year earlier--because of a lack of new music releases, the strength of the U.S. dollar and investments in digital media.

In releasing its results, Sony said that overall the “conditions in the economic environment in which Sony operates became more difficult, reflecting economic slowdowns in major regions such as the U.S., Europe, Japan and Asia.”

Sony said the slower demand for its products meant an oversupply, which in turn led to softer prices. Sony also was affected by the recall of 1.1 million faulty wireless phone handsets in Japan and had additional expenses stemming from early-retirement costs for employees at its Aiwa electronics unit.

As a result of the economic slowdown, Sony said it will slash spending by 25% overall, with the biggest cuts coming in its electronics group.

Sony’s operating loss in its game division narrowed to $25 million as game sales in the U.S. and Europe increased, although the company said that sales of its PlayStation 2 consoles in Japan slowed.

Despite the loss, Sony’s revenue increased during the quarter by nearly 5% to $13.2 billion.

Sony officials said that despite the bad news, overall sales for the company are expected to rise by 5%.