UPDATE 1-Sanyo cuts net profit outlook to zero as chips bite

(Adds restructuring at chip unit, background)

TOKYO Jan 15 (Reuters) - Japan's Sanyo Electric Co Ltd 6764.T, set to be acquired by Panasonic Corp (6752.T), cut its annual net profit outlook on Thursday as losses climb in its chip business, and it said it would eliminate 1,200 jobs.

Sanyo, the world's top producer of rechargeable batteries, said on Thursday that declining sales, a soaring yen and restructuring and impairment costs in its chip operations will cancel out profits.

The world's No.7 maker of solar panels now expects zero net profit for the year to March, against a November forecast for a profit of 35 billion yen ($393.5 million) and a consensus estimate of a profit of 29 billion yen by seven analysts.

Struck by both unit sales declines and price falls, Sanyo's chips will drag down profit by 20 billion yen this year -- seven times its microchip-related losses last year -- its Executive Vice President Koichi Maeda told reporters at a news briefing.

Sanyo, whose products include Eneloop rechargeable batteries, washing machines and medical records systems, will cut 600 regular workers, or 6 percent of its chip workforce, and an additional 600 contract workers at chip operations both at home and abroad, he said.

Panasonic, which will buy Sanyo this year for up to $9 billion, has pledged to exit unprofitable businesses and pool its resources to take flat TV market share from rivals Samsung Electronics Co (005930.KS), Sony Corp (6758.T) and LG Electronics (066570.KS). [ID:NL9416118]

Sanyo, whose major stakeholders include Goldman Sachs (GS.N), Sumitomo Mitsui Banking and Daiwa Securities SMBC, is under increasing pressure from Panasonic to clean up its losses prior to the acquisition, even as consumers stop buying electronics and the global economy contracts.

Sanyo, which sold its loss-making cellphone business to Kyocera Corp (6971.T) in April, now expects an operating profit of 30 billion yen this year, down 40 percent from its outlook given two months ago.

Before the announcement, shares of Sanyo closed down 3.9 percent against the benchmark Nikkei average's .N225 4.9 percent fall. (Reporting by Kentaro Hamada and Mayumi Negishi; Editing by Chris Gallagher)