UPDATE 3-Sharp posts Q3 profit, on course to clear earnings hurdle
* Posts first operating profit in five quarters
* Sticks with full-year operating profit forecast
* Rebound may help Sharp convince lenders it remains viable
By Reiji Murai and Tim Kelly
TOKYO, Feb 1 (Reuters) - Sharp Corp eked out a quarterly operating profit on Friday, improving the bailed-out consumer electronics maker's chances of convincing lenders and shareholders that it remains a viable company.
Sharp stuck to its forecast for a 13.8 billion yen ($151 million) operating profit in the second half, after losing 168.9 billion yen in the first half as the maker of goods from airconditioners to televisions was savaged by lower-cost rivals.
"The results gave a sense of relief to investors as it was able to keep promises with its banks to turn around its business," said Makoto Kikuchi, chief executive of Myojo Asset Management.
"The next focus is whether the company can be profitable on a net basis for the next fiscal year," he added, warning that it faced potential restructuring costs.
Sharp reported a third-quarter operating profit of 2.6 billion yen ($28.5 million), compared with a loss of 24.4 billion yen a year ago and beating market forecasts for a small loss.
Its earnings were bolstered by robust sales of home appliances and mobile phones, along with a weaker Japanese yen that helped it compete overseas.
The group said it made money from its TV business in the third quarter but forecast deeper annual losses from LCD panels due to softer demand for small and medium sized panels for smartphones.
The turnaround will allow Sharp's banks to justify a bailout that last year kept the maker of Aquos TVs in business. It would also unlock further investment from Qualcom Inc that would make the U.S. chipmaker its biggest shareholder.
However, Sharp's future remains in the balance, say investors. It faces tough competition in TVs and LCD screens, and with few assets to fall back on, its cash position is tenuous.
"Sharp has a very small breathing space," said Yuuki Sakurai, CEO at Fukoku Capital Management in Tokyo. "I don't think people are very confident about the future of Sharp at the moment."
Sharp is not as sensitive to foreign exchange movements as more export-reliant competitors, but a one yen change in the dollar/yen rate adds $7.7 million to operating profit. The Japanese currency eased by about 9 yen against the dollar over the course of the quarter.
Sharp won a $4.4 billion bailout from banks including Mizuho Financial Group and Mitsubishi Financial Group last October when it faced the repayment of commercial paper debt it didn't have enough money to pay.
The firm had to mortgage its offices and factories in Japan, including one that makes screens for Apple Inc's iPad and latest iPhone, leaving it with only a few overseas plants it could sell to raise more cash.
It warned in November that it may not be able to survive on its own and doubled its full-year net loss forecast to $5.6 billion.
"It could be that the company and some part could be absorbed by an American company or some part by the Taiwanese," said Fukoku Capital's Sakurai.
Sharp may sell its Chinese TV assembly plant to Lenovo Group , sources told Reuters this month. It is also in talks to sell a Mexico factory to Hon Hai Precision industry , which earlier bought a stake in Sharp's advanced TV panel plant in western Japan.
Hon Hai balked at an earlier agreement to invest in Sharp directly as the Japanese company resisted giving any significant management control to its Taiwanese partner.
Sharp in December turned to Qualcomm, which agreed to invest as much as $120 million in the Japanese company. Qualcomm has made an initial investment and payment of the rest depends on Sharp returning to profit in the six months ending March 31.
Since the start of the year Sharp's shares -- which slumped 55 percent in 2012 -- have risen 5.9 percent compared with a 7.5 percent gain in the benchmark Nikkei 225. Its shares rose 2.9 percent on Thursday, while the benchmark added 0.4 percent.