Japan's disgraced Olympus Corp said Thursday it would consider reinstating its sacked CEO, Michael Woodford, but the gesture failed to erase doubts that it would ever rehire the foreigner who blew the whistle on its crooked accounts.

The maker of cameras and medical equipment said Woodford, an Englishman, would be considered as a candidate for the role of leading Olympus out of a $1.7 billion accounting fraud, one of Japan's worst corporate scandals.

On what will happen to Mr Woodford, it is certain that he is among the options, said Olympus President Shuichi Takayama, one of the directors who voted unanimously in October to sack Woodford after he had queried the firm's dubious book-keeping.

But there remained serious doubts whether Woodford, who went public with his concerns after his sacking, would be reinstated.

I think it is unlikely, CLSA analyst Nanako Imazu said. Why would he (Takayama) want Woodford? ... I don't know the intention of Mr Takayama in saying that.

Takayama, currently the most senior executive after several resignations since Woodford's departure, said he had no plans to meet Woodford who some major Japanese shareholders and lenders privately oppose, according to a banking source.

As of now, I have no plans to meet, he said.

Takayama has said that he and fellow directors will resign soon, to make way for a new board to be elected by shareholders at a meeting in March or April, and that the board wants to choose its successors before it quits. It has set up an external panel to advise on board candidates and other management issues.

Woodford, however, has attacked the existing board as lacking all credibility, saying it has no right to choose its successors. He is assembling his own team of candidates for a new board with himself at the helm as nominated CEO, a move that raised the prospect of battle for control of the company.

In a comment likely to antagonize Woodford further, Takayama added Thursday that some existing directors might not resign after all. So far, only a few directors have quit, including the former chairman, and a former executive vice president.

There is no need for those who are not found responsible (of wrongdoing) to resign, he said. When pressed if he would remain, he added: It is not the stage for me to state this.

NEED FOR FRESH CAPITAL OR TIE-UPS

The next CEO and board of Olympus faces major challenges, starting with a need to repair the once-proud firm's balance sheet, which was revealed Wednesday to be $1.1 billion weaker than had been previously disclosed in its fraudulent accounts.

Olympus shares slumped almost 20 percent after Wednesday's corrected accounts were published, with investors now concerned it might need to merge, sell assets or raise fresh capital.

Takayama said Thursday the company was considering capital and operational tie-ups, among other options, to relieve the pressure on its balance sheet, which was shown to have a very thin layer of equity remaining after the restatements.

Olympus forecast its troubled camera business to make a loss in the current financial years, but said unit sales had grown 15 percent in the six months to end-September, from a year earlier.

The firm, whose main income-earner is its very profitable endoscope business, avoided automatic delisting from the Tokyo Stock Exchange by meeting Wednesday's deadline for producing its overdue second-quarter accounts, giving some initial relief to investors who had feared it might miss the deadline.

However, the 92-year-old firm can still be delisted if the exchange believes the accounting deceit was grave enough.

Woodford said Wednesday he was considering options for recapitalizing Olympus. He did not give an estimate of the sum needed but gave an example of how the firm's strong underlying business would ensure a return on any fresh investment.

For example, if you put $2 billion into the company, the value of the company would probably go up more than $2 billion, he said in an Internet broadcast.

Woodford said he favored private equity or a rights issue over a strategic alliance, which would rob Olympus of its independence. But rights issues, where existing shareholders can buy more shares on a pro-rata basis, are rare in Japan.

Olympus has lost more than half its market value since it sacked Woodford and the scandal erupted. Two top Olympus executives have been found to have masterminded the scheme to cook the books. These executives have since resigned.

Olympus has been dogged by rumors of bid interest from rivals, such as fellow endoscope makers Fujifilm and Hoya, or from private equity since the scandal broke.

The Tokyo exchange said after the announcements that it was keeping Olympus on its watchlist for possible delisting.

Some of the restated accounts also came with qualified opinions from auditors, with KPMG AZSA LLC noting it had been unable to confirm all the money flows involved in the fraud.

(Additional reporting by Linda Sieg, James Topham and Mari Saito; Editing by Mark Bendeich)

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