Shares of Sony ( SNE) fell on Thursday after the company warned that it would post worse-than-expected revenue and operating income in its current fiscal year. The electronics giant now expects to post 110 billion yen ($1.06 billion) in operating income on 7.15 trillion yen in sales, compared with a previous forecast for operating income of 160 billion yen on 7.35 trillion yen in sales. The company attributed the shortfalls to falling prices on video equipment, including DVD recorders and televisions; decreased demand for its semiconductors; and disappointing sales of its portable audio products. That disappointing outlook overshadowed the company's prediction that its net income would actually come in higher than expected. Sony now expects to post 150 billion yen in income this fiscal year, which ends in March, thanks to an accounting change related to its allotment for taxes. In recent trading following the announcement, Sony's stock was off $1.41, or 3.6%, to $37.39. Noting Sony's sales problems with DVD players, portable audio players and the like, a number of analysts had begun to worry recently that Sony would not meet its financial targets this year. In Japan, for instance, the company has seen lower-than-expected sales on its Vaio computers and its DVD recorders. In Europe, sales of the company's video cameras were below expectations. Sales of its portable audio players were disappointing in both Europe and Japan, the company said. Despite its past success with the Walkman, Sony has been struggling to compete in digital music players against Apple's ( AAPL) iPod. Ironically, the company's net income will be better than expected this year because of improving results at its U.S. operations. Because of past losses, the company had racked up sizeable tax credits, but these credits were offset by "valuation allowances." With results improving at its U.S. business and a "sound outlook" for the future, the company reversed $660 million in valuation allowances, the end result of which will be lower taxes in this fiscal year. Sony also gave a preliminary report on its fiscal third-quarter results. When it reports earnings next week, the company expects to post 140 billion yen in net income on 2.15 trillion yen in sales. The results include a restructuring charge of 11 billion yen.