Olympus, the world's leading maker of diagnostic endoscopes, is struggling to recover from a $1.7 billion accounting fraud uncovered last year by its then-CEO, Michael Woodford.

Local media last week reported that Olympus planned to shed 2,500 workers and sell an equity stake to either Sony Corp or Panasonic Corp to bolster its finances.

Panasonic, a leading electronics maker, has been hobbled by losses in its TV business, but there has been speculation that it is interested in expanding into the healthcare industry, which offers more stable revenues.

Panasonic aims to secure a new source of revenue by forming an alliance with Olympus in its mainline operation, Kyodo reported, quoting unidentified sources. Olympus, it said, would get access to funds for its restructuring as well as to marketing resources.

According to the sources, Olympus will issue shares to Panasonic in a private offering and the two companies are discussing a stake valued at 30 billion to 50 billion yen.

Both Olympus and Panasonic declined to comment on the report.

(Reporting by Ayai Tomisawa; Editing by Chris Gallagher and Ron Popeski)

• A Permanent Economic Emergency