UPDATE 3-Canon Q3 profit tumbles, copier outlook murky

* Canon July-Sept operating profit down 54 pct

* Profit roughly in line with market estimates

* Annual outlook unchanged, misses estimates

* Digital camera demand strong, copiers weak

* Ricoh posts 69 pct fall in quarterly operating profit (Updates with U.S. share activity)

By Kiyoshi Takenaka

TOKYO, Oct 27 (Reuters) - Japanese office equipment makers Canon Inc (7751.T) and Ricoh Co (7752.T) posted sharp falls in quarterly profit on sluggish copier demand as companies reined in spending.

Since the global downturn last year, companies worldwide have been cutting costs by curbing fresh purchases and replacements of printers and copiers as well as printing less, battering the profitability of office gear suppliers.

Both Canon and Ricoh stood by their annual operating profit forecasts, which are down 62 percent and 46 percent, respectively, as they see no clear end to the current slump in office equipment demand.

"There's a lot of pent-up IT upgrade demand among companies. But copiers and printers lag other things like PCs among their priorities," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Office equipment makers cannot be top picks for investors unless the overall economy and corporate earnings make a further and sharper recovery."

Shares of Canon trading in the United States fell 2 percent on the New York Stock Exchange to $38.16 on Tuesday afternoon after Canon turned an operating profit of 60 billion yen ($652 million) for the July-September quarter.

The profit was down 54 percent from a year earlier, and in line with the 58.4 billion yen profit expected, on average, by six analysts, according to Thomson Reuters I/B/E/S.

For a graphic of Canon's quarterly operating profit and share price moves, click:

here

Canon, the world's No. 1 digital camera maker ahead of Sony Corp (6758.T), enjoyed strong demand for its single-lens reflex (SLR) cameras, which are high-end models with interchangeable lenses.

But brisk sales of SLR cameras failed to offset sluggish printer and copier demand.

Canon and Nikon Corp (7731.T) together control nearly 80 percent of the lucrative digital SLR camera market.

For the full year to December, Canon stood by its operating profit forecast of 190 billion yen, which is slightly below the 197.9 billion yen expected by analysts.

"There's some bright signs on the consumer side of our products such as SLR cameras," Canon Managing Director Masahiro Osawa told a news conference.

"But when it comes to office equipment, we expect the market to remain sluggish for some time."

Ricoh said its operating profit fell 69 percent from a year earlier to 7.92 billion yen in July-September, which beat the 5.1 billion yen profit expected by analysts.

The company stuck to its operating profit forecast of 40 billion yen for the year to March, down from a 74.54 billion yen profit the previous year and meeting market expectations.

Ricoh last year bought U.S. office equipment distributor Ikon Office Solutions for $1.6 billion, delivering a heavy blow to Canon in the key U.S. market. Before the acquisition, Canon machines accounted for 60 percent of the products Ikon handled.

But in a potential counter attack, Canon said last month it would start providing its multi-functional printers (MFPs) to Hewlett-Packard (HPQ.N), in a move to broaden HP's product lineup and boost Canon's hardware sales.

MFPs typically combine copier, printer, scanner and fax functions.

Before the announcements, Canon shares closed down 1.9 percent at 3,580 yen and Ricoh ended 1.3 percent lower at 1,256 yen, while the benchmark Nikkei average .N225 fell 1.5 percent. (Additional reporting by Nathan Layne and Junko Fujita; Editing by Chris Gallagher and Steve Orlofsky)