The surprise axing of the dividend abruptly ended a 6-week rally that had lifted Sony's shares as much as 25 percent to their highest in more than a year, fuelled by rising confidence in the company's restructuring and its plans for the automotive sensor business.

Sony also said it would cut another 1,000 jobs in its struggling smartphone business, where it is up against fast-growing Chinese manufacturers as well as established names such as Apple Inc and Samsung Electronics.

"If the company were to go through further restructuring, it needs cash, so from this perspective, it makes sense that the company is not paying dividends," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.

Akino reckoned Thursday's slide in the stock price was overdone, but expected it to struggle until Sony gives more details on its restructuring when it announces its July-September results.

After the market close on Wednesday, Sony said it expects a 230 billion yen (1.3 billion pounds) net loss for the year ending on March 31, worse than its prior estimate of a 50 billion yen loss, reflecting an impairment charge for its smartphone division.

On Thursday morning, the shares tumbled to a 5-week low of 1,844 yen before managing a slight bounce to 1,914.5 yen, down 9.8 percent.

MOBILE PILLAR

Sony warned in July of a potential writedown in its mobile business, although the extent of the 180 billion yen charge was at the high end of some analysts' forecasts and raised the possibility of downward revisions in longer-term forecasts.

It also highlighted Sony's weakness in mobile, which it has designated as one of the three pillars of its future business along with games and imaging. Sony's growth strategy so far is leaning heavily on its PlayStation and the network services built around the video game workhorse, as well as its image sensor business.

The suspension of the dividend payment, which last year totalled 25 yen per share, also defies rising pressure on Japanese firms to pay closer attention to shareholders' interests.

Sony had already been expelled last month from a new index of 400 Japanese stocks selected on the basis of investor-friendliness, including return on equity which has typically been relatively low at Japanese firms.

A number of blue-chip companies in Japan have been increasing dividend payouts or moving to boost return on equity through share buybacks, as they come under pressure to deploy more of their cash to benefit shareholders.

(Reporting by Chris Gallagher, Ayai Tomisawa and Hideyuki Sano; Writing by Edmund Klamann; Editing by Ian Geoghegan)