Sony Corp's <6758.T> first profit in five quarters showed a restructuring at the electronics maker is starting to pay off as it halved its annual loss forecast on a rebound in its flat-TV business and cost cuts.

Third quarter to December profit was also driven by its insurance division, whose investments were buoyed by a recovery in Japanese shares.

The company has shed jobs and shut plants following the global economic downturn and has worked to shore up its flat TV division, which has struggled amid stiff price competition with Samsung Electronics Co <005930.KS> and other rivals.

Earnings have bottomed out ... Whether the recovery will continue in the next business year depends largely on its TV operations and videogames, said Kazuharu Miura, a senior analyst at Daiwa Securities Capital Markets.

Sony has carried out a drastic restructuring in its TV operations, but competition will continue to be tough, which will put downward pressure on prices and profit margins.

To further boost competitiveness, the maker of Cyber-shot digital cameras, Bravia LCD televisions and Vaio PCs plans to launch a new content distribution service and 3D TVs this year.

Sony posted an operating profit of 146.1 billion yen ($1.61 billion) for October-December, against a loss of 17.96 billion yen a year earlier. Net profit increased 8 times to 79.2 billion yen while sales rose 3.9 percent to 2.24 trillion yen.

The firm slashed nearly 20,000 jobs in the year to September 2009 and is aiming to cut procurement costs by 20 percent to 2 trillion yen in the year to March 2010, boosting profitability.

In the latest quarter its TV operations posted a profit for the first time in two years, but they will likely remain in the red for the full year, the company said, making it a sixth straight year of annual losses at that division.

Sony has also been struggling to compete with Nintendo Co Ltd <7974.OS> in videogames but last year it launched a lower-priced version of its PlayStation 3 game console, stirring up demand.

Sony's PS3 sales in October-December surged 44 percent to 6.5 million units, helping bring the game unit to a quarterly profit, but it suffered slow demand for the PlayStation Portable and cut the annual sales target for the handheld player by a third.

BOTTOMING OUT

For the year to March 31, Sony cut by half its operating loss forecast to 30 billion yen, raising its annual outlook for the second time in the current business year.

The new forecast compares with a 227.78 billion yen loss in the previous last business year and beats a consensus for a 38.3 billion yen loss in a poll of 19 analysts by Thomson Reuters I/B/E/S.

January sales were in line with our expectations or a little better, and we are sensing the economy bottoming out, Chief Financial Officer Nobuyuki Oneda told a news conference.

There remains a chance that we will achieve break even.

The recent halt in the yen's rise, which had hurt the competitiveness of Sony products in overseas markets, is likely to help buttress its full-year performance, analysts said. Sony earns three quarters of its revenue outside Japan.

Sony ... has (also) been complacent over its brand power, said Park Hyun, an analyst at Prudential Investment and Securities in Seoul.

Oneda said Sony aims to launch new products that will vie with Apple Inc's closely watched iPad, designed to bridge the gap between smartphones and laptops.

Sony is very much interested in this segment of the market and we have necessary technology ... There is no denying that we are running a bit behind, though, he said.

Sony shares closed down 2.2 percent at 3,075 yen ahead of the results, against a 1.3 percent fall in Tokyo's electrical machinery index <.IELEC.T>. Sony shares have gained 18 percent over the past three months while the index rose 8 percent.

(Additional reporting by Tetsushi Kajimoto in Tokyo and Rhee So-eui in Seoul; editing by John Stonestreet)

($1=90.90 Yen)

Electronics Sony