* Digicam business not self-sustainable in long term
* Aims to turn Pentax unit profitable in 2009/10
* Sees 2009/10 sales exceeding Y400 bln vs consensus Y398 bln
* Shares end down 1 pct following comments; Nikkei up 0.2 pct (Adds CEO comments, analyst comments, background)
By Kiyoshi Takenaka and Reiji Murai
TOKYO, Aug 18 (Reuters) - Japanese high-tech glass maker Hoya Corp said it aims to turn its Pentax operations profitable in the year to March 2010, but that its digital camera business needs to seek alliances for survival in the long term.
Hoya, which acquired endoscope and digital camera maker Pentax in 2007 for about 95 billion yen ($1 billion), is ready to spend up to 200 billion yen on M&As to strengthen its health care-related businesses, Hoya Chief Executive Hiroshi Suzuki said on Tuesday.
The company vies with Olympus Corp and Fujifilm Holdings in endoscopes, which are used to examine internal organs, and it competes with Essilor International of France and Germany's Carl Zeiss in eyeglass lenses.
Hoya's Pentax unit posted an operating loss of 11.6 billion yen ($122 million) in the year ended March 31, hit by restructuring costs and sluggish digital camera sales.
"Our digital camera business is not exactly a big operation. There are naturally questions among us whether it is big enough to go it alone," Suzuki told Reuters in an interview.
"I'm afraid it will need some sort of alliance with another company in the long term."
The Tokyo-based company sold 2.3 million digital cameras last business year. That is less than a 10th of Canon Inc's sales of 25.6 million in calendar 2008.
Hoya is the world's 10th-largest digital camera maker trailing larger rivals such as industry leader Canon and second-ranked Sony Corp.
Daiwa Institute of Research analyst Hiroyasu Sato said seeking ties with other companies in the digital camera business is a step in the right direction for Hoya.
"Its camera business is in the phase of developing distinctive products and improving profitability," Sato said.
"But if you look beyond the current phase, an alliance is a necessary step. If you do not have a wide enough range of products you cannot secure store shelves or broaden your user base."
Suzuki said Hoya's financial standing would allow him to spend up to 150 to 200 billion yen on mergers and acquisitions, but the timing is not quite right yet.
"There are multiple potential targets, but I'm not in a hurry," Suzuki said.
"Valuations in the M&A market are not really reflecting tough economic reality. I expect valuations to come down to reasonable levels if we hold back a little longer."
Besides endoscopes, digital cameras and eyeglass lenses, Hoya's product portfolio includes hard disk drive components, contact lenses and LCD photomasks, which are used to etch circuitry onto liquid crystal display panels.
Hoya is the largest contact lens shop operator in the domestic market, running 151 shops in Japan.
Suzuki said he aims to double the number of retail outlets in Japan in four to five years.
He said Hoya's revenues in the business year to next March are likely to exceed 400 billion yen. That compares with a consensus figure from analysts in a Reuters poll of 398 billion yen.
Shortly after Suzuki's comments, shares in Hoya closed down 1 percent at 2,060 yen, underperforming the benchmark Nikkei average, which gained 0.2 percent. ($1=94.82 Yen) (Additional reporting by Mayumi Negishi; Editing by Michael Watson)