UPDATE 1-Canon Q1 profit down 88 pct, raises outlook

* Q1 oper profit tumbles on weak printer, copier demand

* Raises annual outlook on softer-than-expected yen

* Shares end up 6.1 pct ahead of results

TOKYO, April 30 - Japan's Canon Inc reported an 88 percent fall in quarterly profit, hit by slumping demand for copiers and printers, but it raised its annual outlook thanks in part to a weakening yen.

Demand for office machines and their supplies such as toner cartridges remained weak as the global financial crisis made the replacement cycle of copiers and printers longer and prompted corporate clients not to use them as heavily as before.

Canon, which competes with Xerox Corp and Ricoh Co Ltd, earlier this month delayed the construction of a toner cartridge components plant in western Japan for a second time, underscoring weak demand.

But weak sales were partly offset as a softer-than-expected yen in the first quarter boosted overseas earnings.

For the year to December, Canon raised its operating profit forecast by 12.5 percent to 180 billion yen ($1.85 billion).

That compares with a consensus of a 130 billion yen profit in a poll of 21 analysts by Thomson Reuters and a 496.1 billion yen profit a year earlier.

Rival Xerox last week forecast a weaker-than-expected quarterly profit and cut its annual outlook nearly in half, while Ricoh predicted a 13 percent fall in operating profit for the year to March 2010.

Ricoh last October bought major U.S. office equipment distributor Ikon Office Solutions for $1.6 billion, delivering a heavy blow to Canon, whose machines had represented 60 percent of the products Ikon handled before the October acquisition but have rapidly been replaced with Ricoh equipment since then.

Operating profit at Canon, the world's largest digital camera maker ahead of Sony Corp and Nikon Corp, came in at 20.03 billion yen ($205 million) in January-March, compared with a 170.83 billion yen profit a year earlier.

Sales fell 32 percent to 687 billion yen.

Sony is set to announce results for the previous financial year through March on May 14, and Nikon plans to report on May 13.

Canon shares closed up 6.1 percent at 2,950 yen before the earnings announcement, outperforming the Tokyo stock market's electrical machinery index, which rose 4.4 percent.

The shares have recovered nearly 40 percent since hitting their lowest level in more than seven years in early March. The electrical machinery subindex has risen about 36 percent from a low hit in late February.