Oct. 23 (Bloomberg) -- Sony Corp., the world's second- largest maker of consumer electronics, slashed its annual profit forecast for the second time in as many quarters, citing the stronger yen and a slump in the value of stock holdings.

Net income will tumble 59 percent to 150 billion yen ($1.5 billion) in the year ending March 31, the Tokyo-based company said in a statement today. The forecast is 38 percent lower than Sony's July projection and 31 percent below the median of 18 analyst estimates compiled by Bloomberg.

The yen has jumped 31 percent against the euro and 15 percent against the dollar this year, compounding the effects of a global economic slump that's undermining Chairman Howard Stringer efforts to sell Bravia televisions and Cyber-shot cameras. Sony cut the estimated value of its investments by 60 billion yen and signaled the level may be lowered further after stock markets lost more than $10 trillion this month.

``Consumer spending will likely slow significantly across the globe and the stronger yen will weigh on company earnings,'' said Yoji Takeda, who helps manage $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``The impact on Japanese exporters is substantial.''

Sony, which earned 77 percent of sales overseas last year, dropped 9.5 percent to 16.81 euros as of 11:26 a.m. in Frankfurt trading, widening the stock's loss for the year to 55 percent. The shares closed 6.3 percent lower on the Tokyo Stock Exchange before the forecast cuts.

`No Precedent'

``The current situation has no precedent,'' Chief Financial Officer Nobuyuki Oneda said at a briefing in Tokyo. ``Although we have already implemented cost-cutting measures, we still have to consider further action to get through this difficult time.''

The company now expects full-year operating profit, or sales minus the cost of goods sold and administrative expenses, of 200 billion yen, 57 percent less than its July forecast, while sales are projected at 9 trillion yen, down from 9.2 trillion yen estimated previously.

The yen's gains alone will squeeze operating profit by 130 billion yen, Sony said. A global slowdown in demand for liquid- crystal-display TVs and digital cameras will cut profit by 90 billion yen, it said.

The company cut its full-year forecast for television sales to 16 million units from 17 million, and trimmed the projection for digital-cameras to 24 million from 26 million. Sony said it's ``on track'' to meet its target of selling 10 million PlayStation 3 game machines this year.

It will be ``difficult'' to turn the television and game operations profitable this year, Oneda said. The yen's appreciation will trim full-year profit at the game business by 30 billion yen this year, he said.

Share Slump

Falling valuations of securities, including convertible bonds held by the company's Sony Financial Holdings Inc. unit, will lower operating profit by 60 billion yen, Sony said. Declining stock prices may further undermine the outlook because the new forecasts reflect equity prices until Sept. 30, Sony said.

As of yesterday, worldwide stock markets had tumbled 25 percent this month, erasing $10.36 trillion of value, according to data compiled by Bloomberg.

Brokerages including Morgan Stanley and Merrill Lynch & Co. lowered their outlook for the consumer electronics industry this month, saying profit may not have hit bottom yet.

Weaker Industry Outlook

Morgan Stanley cut its recommendation on the industry to ``cautious'' from ``in-line'' in an Oct. 3 report. Merrill Lynch, in a report on Oct. 16, reduced its earnings forecasts for companies including Panasonic Corp., the world's largest maker of consumer electronics.

The stronger yen, the best performer among 16 major currencies tracked by Bloomberg, undermines sales at Japanese exporters when converted to local currency. Toyota Motor Corp., Japan's largest carmaker, will miss its full-year profit forecast by 16 percent, according to analysts surveyed by Bloomberg.

Sony said it was assuming an exchange rate of 140 yen to the euro for the second half of the fiscal year, compared with its July projection of 160 yen. The company expects the dollar at 100 yen, compared with 105 yen.

The euro recently traded at 125.4 yen and the U.S. currency at 97.7 yen.

Sony said its second-quarter net income fell 72 percent to 21 billion yen, sales slipped 1 percent to 2.07 trillion yen, while operating profit slumped 90 percent to 11 billion yen, based on preliminary figures.

The company is scheduled to report final results on Oct. 29.

To contact the reporter on this story: Hiroshi Suzuki in Tokyo at Hsuzuki5@bloomberg.net.

Last Updated: October 23, 2008 06:01 EDT