April 28 (Bloomberg) -- Shares of Sony Corp., the world's second-largest maker of consumer electronics, fell by the most in three years after the company forecast operating profit this fiscal year that fell short of analysts' estimates.

Sony slid 5.1 percent to 5,720 yen as of the 3 p.m. close in Tokyo. The company said yesterday operating profit will fall 48 percent to 100 billion yen ($874 million), mainly due to costs for developing the PlayStation 3 game console. The median estimate of seven analysts surveyed by Bloomberg was for a 170 billion yen profit.

The PlayStation 3's release has been delayed until November, giving Microsoft Corp.'s Xbox 360 a head start and spoiling Chief Executive Officer Howard Stringer's efforts to spur earnings. Costs for the player, including a Blu-ray DVD player and a new graphics chip, will cause a 100 billion yen annual loss at the video-game business.

The ``loss on the PlayStation project is worrisome,'' said Tsuyoshi Shimizu, who helps oversee $16 billion at Dai-Ichi Kangyo Asset Management Co. in Tokyo. ``The shares had been rising way ahead of earnings on speculation over better results. It's a bit difficult to become bullish on the stock.''

Sony's stock had surged to a four-year high last week on optimism the company would report improved earnings at its electronics business, which accounts for about two-thirds of operating profit.

`Sony Shock'

The decline is the biggest since April 28, 2003, when Sony surprised investors by reporting a wider-than-expected loss and triggered a 27 percent decline in a two-day period, known as the ``Sony Shock.''

Sony today said it expects to benefit from higher margins for its Bravia LCD televisions and chips used in the PlayStation 3 game console and digital cameras.

``Televisions and semiconductors will be the biggest growth driver this fiscal year,'' said Takao Yuhara, head of Sony's investor relations group.

The company said today shareholding held by overseas investors rose above 50 percent for the first time. Foreign investors held 50.1 percent of the company as of March 31, compared with 49.6 percent six months ago, spokesman Atsuo Ohmagari said.

Net Gain

Net income this fiscal year will rise 5.2 percent to 130 billion yen, missing the median 143 billion yen profit forecast from the analyst survey. The profit gain may be helped by contributions from affiliates including Sony's S-LCD Corp. venture with Samsung Electronics Co., Sony Ericsson Mobile Communications AB, Sony BMG and Metro-Goldwyn-Mayer Inc.

``The forecasts were a negative surprise,'' said Mitsuhiro Osawa, an analyst at Mizuho Investors Securities Co. who rates Sony ``neutral.'' ``The PS3 is a huge cost.''

Sony on March 15 delayed the release of the PS3 by about six months to November because of a holdup in finalizing standards for the Blu-ray high-definition DVD format.

``The risk with the PlayStation 3 is that if it fails, it's not a matter of only the game business going sour, but the whole electronics business taking a hit,'' Yuhara said. ``It's a concern for the entire Sony group.''

The PlayStation 3 also features the Cell chip, the company's fastest processor ever, forming a key part of Stringer's strategy to use movies, music and games to spur sales of consumer electronics. The video game division will probably post a loss of about 100 billion yen this fiscal year, chief financial officer Nobuyuki Oneda said yesterday at a press conference.

Earlier PlayStation Models

Sales of the PlayStation 2 console and PlayStation Portable handheld player will fuel first quarter profit at the company's game business, Yuhara said today. The division will lose money in the second half after the PS3's debut, he said.

Today's drop also marks a contrast to the 14 percent gain in Sony's share price on Jan. 27 when Sony raised its full-year profit forecast for the fiscal year just ended to 70 billion yen from a 10 billion yen loss.

Sales for the year started April 1 may rise 9.7 percent to 8.2 trillion yen as shipments of Bravia liquid-crystal display TVs more than double to 6 million units, and the company releases movies such as ``The Da Vinci Code.''

Sony overtook three rivals in the LCD television market in October to December to rise to No. 1 in terms of shipments, as the company introduced new models and began making panels at a joint venture with Samsung, helping lower costs. The two companies said this month they will spend $2 billion to build the world's biggest LCD panel-making factory.

``Sony's TV business still has room to improve,'' said Hisakazu Amano, deputy general manager of T&D Asset Management Co., which manages the equivalent of $5 billion. ``When the company starts producing hit products, it will have a big impact on its overall business.''

The company today said it would reduce capital spending in the year starting April 1, 2007, to 400 billion yen from 460 billion yen in the current fiscal year.

To contact the reporter on this story: Daisuke Takato in Tokyo at dtakato@bloomberg.net

Last Updated: April 28, 2006 03:02 EDT