Japan's Sanyo Electric Co. Ltd. is considering selling its loss-making mobile phone operations and is already in preliminary talks with several domestic cellphone makers, a source close to the matter said.

Sharp Corp. and Kyocera Corp. are among the likely candidates for buying the unit, which accounts for about 15 percent of Sanyo's group sales, the source said on Monday.

The latest restructuring step at the Osaka-based consumer electronics maker comes after the company posted a 72 percent fall in operating profit for April-June, hit by sluggish sales of its mobile phones and higher raw materials prices.

Sanyo now expects to sell about 11 million units of mobile phones in the current business year to March 2008, down from its initial estimates of 12.5-12.6 million.

Sanyo, which has posted net losses for the past three business years, sold its stake in Sanyo Electric Credit Co. Ltd. this year and is widely believed to be in the process of selling its semiconductor operations.

Shares in Sanyo, the world's largest maker of rechargeable batteries, were down 3.1 percent at 188 yen by midday, underperforming the Tokyo stock market's electrical machinery index, which fell 0.15 percent.