Sony was forced to admit on Thursday that it would not reach its target of a 5 per cent operating profit margin for the year, cutting its forecast due to the weak dollar and a slowdown in demand amid the fallout from the US subprime crisis.

The sprawling electronics-to-entertainment behemoth said its operating margin for the year would be 4.6 per cent.

The admission came not long after Sir Howard Stringer, chief executive, reaffirmed in December that the company was on track to meet the target.

Nobuyuki Oneda, Sony’s chief financial officer, blamed the 0.4 percentage point shortfall on the weakening dollar. A one-yen rise against the dollar takes away Y6bn ($56m) in operating profit while a similar rise against the euro costs the company Y6.5bn. Mr Oneda said that forex movements were “quite rapid” and executives had been caught off-guard. He declined to comment whether senior executives would be held responsible for the missed target.

Sony cut its operating profit forecast for the year ending March 31 to Y410bn, down from an earlier estimate of Y450bn.

Other worrying signs emerged from Sony’s core businesses on Thursday. The company cut its shipment target for the PlayStation 3 games console to 9.5m units from a previous 11m.

Though the games unit swung into profit in the October-December quarter, which spans the important Christmas shopping season, Mr Oneda said the trend might be short-lived. “We are not sure whether we can make a profit in the fourth quarter. It might be difficult,” he said.

Strong sales over Christmas were prompted, in part, by the introduction of a cheaper PS3 model in November.

Third-quarter operating profit was Y189.4bn, a six per cent rise from last year. The company’s core electronics division, however, reported a 7 per cent operating profit decline to Y166.5bn due to savage price competition in the markets for flat-panel televisions and digital cameras.

Matsushita, known for its Panasonic brand and the world’s leading plasma TV maker, on Thursday maintained its full-year forecasts and reported a 22 per cent increase in quarterly operating profit to Y165.4bn.