Sony Corp. (NYSE ADR: SNE) is facing the first consecutive annual loss of its 63-year history.

The Tokyo-based company lost $1.1 billion (98.9 billion yen) last year, and it expects to lose another $1.4 billion (120 billion yen) in its fiscal year ending March 31.  That would be Sony’s first back-to-back annual loss since the company went public in 1958.

And despite renewed optimism within its ranks, Sony still faces a plethora of challenges, including a questionable direction, cost-conscious consumers and a strengthening yen.

The onetime bellwether of the electronics industry has seen its market share crumble in almost every category: Nintendo Co. Ltd.’s (OTC ADR: NTDOY) Wii game console has supplanted Sony’s PlayStation brand, Sony has given up its lead in portable media players to Apple Inc.’s (Nasdaq: AAPL) iPod, and Samsung Electronics Co. Ltd. is now the world’s largest seller of televisions.

Hoping to turn the

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In the Gaming segment, Sony's (SNE) PlayStation 3 (PS3), the number 3 console in the United States, is losing ground to Nintendo's (NTDOY) Wii, and Microsoft's (MSFT) Xbox 360.

Although Sony lowered the price of its top-tier PS3 console from $599 to $399 to withstand competition, the current price is still above Nintendo's Wii the most popular console in the U.S., which is priced at $250 and Microsoft's Xbox, whose lowest priced model is sold for $200. With delays in the launch and volume production of its latest PlayStation game console, Sony severely lags behind competition, which could lead to loss of market share.

According to research group NPD, game industry sales declined by 30% and went below $1 billion in the month of May - the largest drop in sales for the first time in 9 months. In May, approximately 289,500 units of Wii

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Will Danoff is one of those "best of breed" fund managers I follow, he runs Fidelity Contrafund (FCNTX) - he does not run a concentrated fund strategy but considering the size of his fund (now I believe the 7th or 9th biggest in America) he has had a very good run, although he skews to the larger cap type of stocks. I enjoy reading his thoughts when they are published in major publications and Kiplinger Magazine has an article about him this month. Like most, he has struggled this year, down nearly 17% year to date (down an additional 5% since the mid August interview) but I am posting some excerpts from the article below His top 10 holdings ...