Sony Corp. has reported a smaller-than-expected 26.3 billion yen ($289 million) quarterly loss as cost cuts combined with healthy sales of PlayStation 3 game consoles and Michael Jackson hits helped it inch toward recovery.

The Japanese electronics and entertainment giant has been battered by the global slowdown, sliding prices of gadgets and its failure to produce new blockbuster consumer products. But Tokyo-based Sony Corp. said today (Oct. 30) it now expects a smaller flow of red ink for the full fiscal year through March 2010.

It's forecasting a 95 billion yen ($1 billion) loss compared with the initial projection for a 120 billion yen ($1.3 billion) loss. The new forecast is marginally better than the 98.9 billion yen loss it suffered the previous fiscal year.

However, the perk Sony got from nostalgic demand for Jackson albums following his death in June wasn't enough to offset the losses in its other divisions.

Other best-selling albums for the quarter included Whitney Houston's "I Look To You" and the King of Leon's "Only By The Night," Sony said in a statement.

A strong yen, which diminishes the overseas earnings of Japanese exporters, erased 77 billion yen ($846 million) from Sony's quarterly operating profit.

For the first six months of the fiscal year, Sony lost 63.4 billion yen ($697 million yen), a reversal from a 55.79 billion yen profit for the first half of fiscal 2008, on 3.261 trillion yen ($35.8 billion) sales, down 20% from the previous year.

Sony shares, which nose-dived to about 1,500 yen ($16) earlier this year, gained 2.8% to close at 2,785 yen ($30) in Tokyo.