They said Sony's current business year earnings will be largely protected by hedge contracts that locked in strong dollar rates before the rout, but earnings in 1999-2000 could be seriously affected.

Kimihide Takano, analyst at Dresdner Kleinwort Benson Securities, said Sony's group operating profit for the next business year could plunge as much as 40 per cent from this year. He estimates operating profit for the 1999-2000 year at 215 billion yen down from an estimated 373 billion yen profit for the 1998-99 year if the yen continues to hover at around 120.

"The strong yen is an adverse factor for Sony, already suffering from pricing pressure following Asian economic woes," Takano said in a report.

"The sharp decline in earnings would make Sony an ordinary company in terms ofprofitability," he said.

Takano expects Sony's return-on-equity ratio, an important benchmark for profitability, to drop to 4.1 per cent in 1999-2000 from 13.6 per cent in 1997-98.

Vulnerable to the high yen and the U.S. economic outlook, Sony shares have tumbled on the Tokyo stock market since early October when the sudden reversal in the dollar's fortunes begun.

The stock hit its year low of 7,770 on October 9. It closed at 8,590 on Wednesday, up 3.25 per cent. The issue hit record peaks in July of more than 13,400 when the dollar was flying high at 140 to 145 yen.

A strong dollar increases the value, in yen terms, of profits earned via exports and U.S.-based operations.

Analysts are watching closely to see if Sony will revise down its 1998-99 earnings outlook next week, when it unveils first-half business results.

Sony said in July it expected to post a 470 billion yen group operating profit and 215 billion yen group net profit in the current business year.

They say a slight downward revisionis inevitable as the high yen would hit fourth-quarter earnings, which are not covered by hedge contracts.

They expect the strong yen to prompt Sony to boost overseas investments and look for belt-tightening measures later this year.