Sony shock sends Japanese tech shares diving
Friday, 24 October 2008 12:20Japan's technology titans saw more than 10% of their market values wiped out today after a profit-warning from Sony Corporation sparked fears of an industry-wide earnings slump.
Analysts scrambled to cut their earning forecasts for Sony and other electronics makers, many of which have enjoyed record profits in recent years helped by a weak yen and strong demand overseas.
Analysts were surprise at the extent of the Sony downgrade, which was seen as one of the reasons for a 9.6% plunge in Tokyo's Nikkei index. They expect Sony's operating profit to drop 65% to 130 billion yen ($1.37 billion) this year, short of the company's own forecast for 200 billion yen.
In South Korea, Samsung Electronics, the world's largest memory chip maker, reported a 44% fall in third-quarter net profit, blaming the global economic downturn.
Sony said currency movements were the main culprit for its problems. Japanese companies rely heavily on overseas markets and a stronger yen can have a severe impact on their repatriated earnings.
Sales of televisions, compact cameras and camcorders were also weak, and analysts agreed with the company's view that it would be hard for its television business to break even this year.
Sony has endured a difficult spell in the face of tough competition from rival products such as Apple's iPod and Nintendo's Wii. But it posted record profits last year amid signs of a recovery in its fortunes.
Investors are now bracing for profit warnings from other electronics makers due to the surging yen and softer demand. The Japanese currency has soared amid recent financial turmoil as investors unwind risky bets.
