By Sachi Izumi and Mariko Katsumura

TOKYO (Reuters) - Shares of Sony Corp <6758.T> soared 9 percent to their highest in two and a half months on Thursday after it forecast an unexpectedly big operating profit this year as it aims to boost flat TV sales and wipe away losses on the PlayStation 3 game console.

Despite suffering an operating losses in the fourth quarter, Sony, locked in a three-way battle with Microsoft Corp <MSFT.O> and Nintendo Co Ltd <7974.OS> in the game console industry, has been able to narrow losses on PlayStation 3 by cutting manufacturing costs and expanding sales.

With a recovery in the game business, Sony now aims to take its videogame and TV operations into profit this year.

Sony's surprisingly strong outlook followed other bullish results by Matsushita Electric Industrial <6752.T> and Nikon Corp <7731.T>, easing investors' worries over the negative impact from a stronger yen and a decline in consumer spending both at home and overseas.

"With their strong brand name and pricing strategy, Sony successfully rode off negative waves like a stronger yen, price competition and generally weak Christmas sales in North America," said Ichiyoshi Securities' chief strategist Masanobu Takahashi.

"Now the market knows who the winners are, and money is targeting only such winners."

Sony, the maker of VAIO personal computers and BRAVIA television sets, said on Wednesday it expects operating profit to grow 20 percent to 450 billion yen ($4.28 billion) in the year to March 2009, beating a market consensus of 428.5 billion yen. The upbeat outlook comes despite hurdles such as a slowing U.S. economy and a stronger yen.

In the January-March quarter Sony suffered an operating loss of 4.7 billion yen as a weak stock market ate into the value of securities held by its finance arm. The result fell short of an average estimate of a 27.3 billion yen profit from five analysts surveyed by Reuters.

The results were welcomed by many analysts.

Nomura Securities lifted its rating on Sony to "strong buy" from "buy" and UBS Securities hiked its target price for the shares to 5,000 yen from 4,700 yen.

Sony's shares rose as high as 5,350 yen, up 10.3 percent -- their biggest percentage gain since January 2006.

The shares closed Thursday's session up 8.9 percent at 5,270 yen, their highest close since February 27. The gain contributed the most to a 1.4 percent gain in the TOPIX index <.TOPX> of all first-section shares on the Tokyo stock market, and boosted Sony's market value by 502 billion yen to 5.3 trillion yen.

Deutsche Securities analyst Yasuo Nakane said Sony's fundamentals were improving and sentiment towards Sony would likely be positive at least until the company issued a new business strategy in June. "With sales rising in developing countries, Sony can keep increasing sales even if macro economies weaken a little in Europe and America," he said.

"In addition to that, Sony has been fending off an impact from exchange rates, especially from the dollar, by linking sales and costs to the dollar through producing locally and buying key parts with dollars."

SOME WARY

Sony, which once suffered from weak demand for TVs, has also enjoyed strong sales of Cyber-shot digital cameras, VAIO PCs and Handycam camcorders, helping push its operating profit up more than five-fold in the full year that ended on March 31.

While many analysts and investors applaud Sony's business outlook, some were wary and said the market was overreacting to the news. Some also said that behind Thursday's big gains was active buying by investment funds that oversold Sony's shares earlier this year.

Hit by a sharp rise of the yen against the dollar, Sony's shares tumbled as low as to 3,900 yen on March 18, their lowest intraday level since November 2005.

Chibagin Asset Management senior managing director Fujio Ando voiced concerns over Sony's television business and said he found rival Matsushita Electric Industrial Co <6752.T> was making a stronger recovery than Sony.

"One of the issues I am concerned about is how they (Sony) plan to procure display panels in the short term to meet their bullish TV sales target," he said.

"Another concern is that while display panel prices are not falling much, TV prices have been falling a lot. So I am wondering how they (Sony) plan to maintain profit margin in that area."

Sony has been cutting jobs and shedding non-core assets over the past three years in far-reaching turnaround efforts led by Chief Executive Howard Stringer. Sony aims to turn its videogame and TV operations to profit this year.

($1=105.07 Yen)

(Additional reporting by Mariko Katsumura and Sachi Izumi, Editing by Michael Watson)