Sony chief executive Kazuo Hirai has been trying to turn around
its unprofitable smartphone and television divisions
Sony shares plunged by up to 12% in
Tokyo trading after it warned of a bigger than expected annual loss of $2.14bn
(£1.3bn) because of its struggling mobile phone business.
It will also not pay a year-end dividend for the first time
since becoming a publicly-listed company.
Sony's share price eventually closed 8.6% lower at 1,940 yen,
erasing about $1.8bn in market value.
It had issued the profit warning after stock markets had closed
on Wednesday.
This is the sixth downward revision to earnings guidance from
Sony under chief executive Kazuo Hirai, who took charge in 2012.
The Japanese electronics giant also faces the risk of losing its
only remaining investment grade credit rating.
Ratings agency Standard and Poor's (S&P) warned that Sony
may be downgraded to 'junk' because of its poor financial performance. Sony is
already rated junk by rival agencies Moody's and Fitch.
S&P said Sony's mobile business was likely to face
"intensifying competitive pressure" and said its outlook on its
current rating of 'BBB-' had been revised to negative.
"Even though the market continues to grow, Standard &
Poor's views the smartphone business as risky, given intense competition with
Chinese makers, strong pressure to cut prices and, as a result, thin margins in
general," it said in a statement.
"To restore its smartphone business, Sony will shift
strategy to focus more on profitability than scale, but we believe it will not
be easy for Sony to maintain brand recognition and generate stable
profitability in this competitive market."
Major overhaul
Sony says weak performance in mobile unit will cause bigger loss
for end of March 2015
Sony said its mobile business had been losing money as a result
of rising competition from global rivals such as Apple and Samsung.
The company's high-end Xperia smartphones have not sold well in
China and the US because of local competition and limited distribution.
The consumer electronics giant has been losing money for the
past few years and has undertaken a major restructuring to try to stem the
losses.
Under Kazuo Hirai's tenure as chief executive, Sony has sold off
parts of the business deemed not central to the company's operations, including
its personal computer business.
It also off-loaded its US office building in New York for more
than $1bn, and the "Sony City Osaki" premises in Tokyo, which had
been its headquarters for six decades.
In addition, Sony culled 5,000 jobs from its computer and
hard-hit television unit, which Mr Hirai has so far refused to sell because it
is considered a core business.
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