Japan's Olympus Corp has launched a review of its business structure, according to an internal memo, amid speculation that the 92-year-old company may have to sell assets in order to survive a massive accounting scandal.

The maker of cameras and medical equipment is also looking to reform its much-criticised corporate governance arrangements, and is setting up separate teams to supervise the two reviews, according to the November 28 memo, obtained by Reuters and later confirmed by the company.

They will make clear the optimal business structure and the proper profit structure to promote the steady further development of our business, President Shuichi Takayama wrote in the memo to Olympus employees.

Olympus, under investigation by police and at risk of being delisted from the Tokyo market, is keen to protect its highly profitable endoscope business from any fall-out of the scandal.

So far, there is no sign the six-week-old scandal has disrupted Olympus's core $2.6 billion (1.6 billion pound) diagnostic endoscope business, which enjoys a near-monopoly worldwide. But this unit is housed in a group that is highly geared and that is expected to make major writedowns once its accounts are set straight.

The Nikkei business newspaper has reported that Olympus recently offered its creditor banks a plan to cut its debt by about 260 billion yen (2.1 billion pound) over the next three years and might sell assets in order to do so.

Olympus's camera business currently runs at a loss and it also has businesses in microscopes, the field where it started almost a century ago, industrial testing systems and mobile phones, a small division emerging as a key focus of Japanese authorities investigating the scandal.

Investment bankers say rivals in both the endoscope and camera markets are closely watching events unfold at the company, although prospective bidders are expected to stay on the sidelines until the situation becomes clearer.


President Takayama vowed last week to set the company on a path to revival, even as it remains the target of investigations at home and abroad in one of Japan's biggest corporate scandals.

Japan's securities regulator, the Securities and Exchange Surveillance Commission (SESC), has launched an on-site investigation of Olympus to uncover details of its loss cover-up scheme, the Nikkei said on Tuesday.

The SESC will ask Olympus to submit in-house financial documents concerning past mergers and acquisitions, and will examine the processes in which investment losses were moved off the company's balance sheet, the daily reported.

Olympus spokesman Yoshiaki Yamada said on Tuesday he was unable to comment on investigations.

Former Olympus President Masatoshi Kishimoto, however, has told a third-party investigative panel that he was unaware of efforts to hide losses when he was at the helm from 1993 to 2001, a key period in the saga, media reported on Tuesday.

The third-party panel, set up by Olympus and due to report its findings in early December, believes a 30 billion yen overseas investment fund that appeared on Olympus's books for the first time in 2000 was a so-called tobashi scheme designed to hide losses, the daily Mainichi Shimbun said.

Olympus has so far admitted to using some unusual M&A deals and accounting tricks to hide investment losses that media reports have estimated at hundreds of millions of dollars.

One focus will be the company's actions around the 2000/01 fiscal year, when Japan switched to market-value accounting and when many companies were forced to come clean on losses from so-called zaitech investment schemes.

Such schemes were popular in the late 1980s but they saddled many firms with huge investment losses when the bubble economy burst at the end of that decade.

We settled our losses appropriately with special charges,

Kishimoto was quoted as telling the Mainichi, pointing to a 16.9 billion yen write-off in the business year to March 2000 to cover latent losses on investments.

I have not been involved in any cover-up of losses.

Takayama, who took the helm at Olympus after his predecessor Tsuyoshi Kikukawa resigned over the scandal, said last week that former Olympus directors would also be held to account for any responsibility in the scandal.

(Additional reporting by Taiga Uranaka in Tokyo, Shounak Dasgupta in Bangalore; Writing by Edmund Klamann)