TOKYO - JAPAN'S struggling Sanyo Electric Co. said on Wednesday it was considering a capital tie-up with rivals including Panasonic Corp., as it reported a slump in quarterly profits.

A takeover of Sanyo would mark the first major shake-up of Japan's consumer electronics industry in response to the current downturn triggered by the global financial crisis and a stronger yen.

Sanyo is 'keenly examining' a tie-up with another electronics maker, group president Seiichiro Sano told a news conference.

He said Sanyo hoped to maintain its brand even if it is absorbed by a bigger electronics group.

Sanyo has slashed thousands of jobs and sold non-core operations as part of a massive overhaul in recent years, while increasing its focus on rechargeable batteries and environment-friendly technology.

Weekend media reports said Sanyo and Panasonic president Fumio Otsubo had reached a 'broad agreement' on a deal for Panasonic to buy a majority stake in its smaller rival from a clutch of financial heavyweights.

Sumitomo Mitsui Banking Corp., Daiwa Securities SMBC and Goldman Sachs have shares in Sanyo which if converted into common shares would represent some 70 per cent of the electronic maker's voting rights.

Through the acquisition of Sanyo, Panasonic reportedly hopes to become the nation's largest electronics maker with increased sales of rechargeable and solar batteries.

Sanyo said on Wednesday that its net profit tumbled to 4.40 billion yen (S$65.6 million) in the three months to Sept from 13.41 billion a year earlier. Operating earnings dropped 7.0 per cent to 18.97 billion yen.

In the first half to Sept, net profit more than doubled to 32.65 billion yen thanks to a one-time gain from the sale of its mobile telephone manufacturing business.

But first-half operating profit declined 11.3 per cent to 23.97 billion yen, hit by a strong yen and rising prices of raw materials.