UPDATE 2-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

* Fujifilm sees Y90 bln yen 09/10 OP loss, to cut 5,000 jobs

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 on cost cuts and 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.

Fujifilm Holdings, a rival in digital cameras and office equipment which has been hit much harder by the economic downturn, forecast a 90 billion yen ($923 million) annual operating loss as it scraps equipment and cuts 5,000 jobs.

Canon, whose other competitors include 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 Canon's overseas sales have been boosted by softer-than-expected yen. The company also said it would aim to cut 172 billion yen in costs this year, 60 billion yen more than originally planned.

Canon raised its 2009 operating profit forecast by 12.5 percent to 180 billion yen, in line with an estimate in the Nikkei newspaper last week. But it lowered its sales forecast by 5 percent to 3.33 trillion yen.

Mizuho Securities analyst Ryosuke Katsura said the operating profit forecast change was effectively a downward revision after stripping out currency effects but that the results show Canon is holding up relatively well.

"Some had expected losses for Canon's first quarter, so I think it's positive that the firm managed to post profits," he said. "Its cost-cutting efforts should be given some credit, but I have yet to see how the company achieves growth."

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 its 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.