S.Africa's Mandela has lung infection, responding to treatment


JOHANNESBURG (Reuters) - Former South African President Nelson Mandela , who is 94 and has been in hospital since Saturday for tests, has suffered a recurrence of a lung infection but is responding to treatment, the government said on Tuesday.

The revered anti-apartheid leader and Nobel Peace laureate is spending his fourth day in a hospital in the South African capital Pretoria . He remains a hero to many of South Africa 's 52 million people and two brief stretches in hospital in the last two years made front page news.

"Doctors have concluded the tests, and these have revealed a recurrence of a previous lung infection, for which Madiba is receiving appropriate treatment and he is responding to the treatment," the government said in a statement.

Mandela, whose clan name is 'Madiba', was admitted to the Pretoria military hospital on Saturday after being flown from his home village of Qunu, which is in a remote, rural part of the Eastern Cape province.

Until now, South African authorities had given few details about the reason for his latest visit to hospital.

In an interview late on Monday with South Africa's eNCA television channel, Mandela's Mozambican-born wife Graca said the former president's "sparkle" was fading.

When he was admitted to hospital on Saturday, officials stressed there was no cause for concern although domestic media reports suggested senior members of the government and people close to him had been caught unawares.

Mandela, South Africa's first black president and a global symbol of resistance to racism and injustice, spent 27 years in apartheid prisons, including 18 years on the windswept Robben Island off the coast of Cape Town.

He was released in 1990 and went on to be elected president in the historic all-race elections in 1994 that ended white-minority rule in Africa's most important economy.

He used his unparalleled prestige to push for reconciliation between whites and blacks, setting up a commission to probe crimes committed by both sides in the anti-apartheid struggle.

Mandela's African National Congress has continued to govern since his retirement from politics in 1999, but has been criticised for perceived corruption and slowness in addressing apartheid-era inequalities in housing, education and healthcare.

Mandela spent time in a Johannesburg hospital in 2011 with a respiratory condition, and again in February this year because of abdominal pains. He was released the following day after a keyhole examination showed there was nothing serious.

He has since spent most of his time in Qunu.

His fragile health prevents him from making any public appearances in South Africa, although he has continued to receive high-profile domestic and international visitors, including former U.S. President Bill Clinton in July.

Peppermint pigs a smashing tradition in NY


SARATOGA SPRINGS, N.Y. (AP) A holiday tradition in this upstate New York resort town has a peppermint twist: pig-shaped hard candies are sold with little metal hammers to smash them at Christmas.

The peppermint pigs, which can weigh up to a pound, are considered good luck charms by some. Family members will take turns whacking the piggy tokens of holiday cheer into little candy shards.

"We do find that some people are a little taken aback: 'What's the whole idea of the pig and the hammer? What are you doing? And is someone insulting me by giving me a pig?'" said Mike Fitzgerald , owner of Saratoga Sweets , which makes the pigs that can be the size of a big bar of bath soap.

Fitzgerald has pigs on his brain this time of year. A small crew at his shop south of Saratoga Springs in Halfmoon makes the hard candy from dawn to dark in a shop distinguished by boiling red pots of candy and an overwhelming scent of peppermint. Fitzgerald is hurrying to fill thousands of pig orders around the country.

Why pigs?

It could be related to the marzipan pigs northern European confectioners make at holiday time as good luck symbols. Fitzgerald said it's possible chefs at the old hotels in Saratoga Springs in the late 19th century couldn't easily make marzipan, so they improvised with peppermint hard candy.

In the old days, the pig was placed on the Christmas dinner table. Father would wrap it in a napkin and crack it with the steel rod used to sharpen knives so the family could share the sweet-tasting bits, Fitzgerald said. But by the mid-20th century, the area holiday tradition went the way of lit candles on Christmas trees.

In 1988, Fitzgerald made a first run of 60 peppermint pigs at the request of the local historical society. He was surprised to see people lining up to buy them, many of them older people who fondly recalled smashing pigs when they were young. He sold out his run and never looked back.

"It's been a pig race ever since. This year we'll make about 130,000 pigs," he said.

As Fitzgerald spoke, workers stirred bubbling tea pots filled with a Pepto-pink mix of sugar and corn syrup. The candy mix is hand-poured into cast aluminum molds to make one of three pigs: Holly (3 ounces and 3 1/2-inches long), Noel (a half pound and 5 1/2 inches) or the big man, Clarence (1 pound and 6 inches).

The hardened pigs have a shiny, glassy quality other hard candies with a higher corn syrup content lack. A quick strike by Fitzgerald's hammer shattered a pig.

"It has to break like glass," Fitzgerald said with satisfaction.

It's not as though sales of candy canes more than 1.8 billion are made a year are being threatened. But the pigs are a popular item in gift stores in Saratoga Springs and other retailers, dressed in red velvet bags with a shiny, silver hammer. (Once you get the hammer, you can order a refill without one.)

"Thanksgiving sort of kicks it off and from here on in, it gets crazy," said Marianne Barker of Impressions of Saratoga.

And the pigs have extended beyond their upstate New York habitat through online sales and catalogs. In Georgia, Lynn Barlow bought a pig on a lark in 1997 and shared it with her family on Christmas. A good luck streak followed that included a raise for her husband, one son bagging the biggest buck of his life and another son's team winning a basketball tournament.

The White, Ga., resident said pigs have been passed around at the holiday table ever since, now with grandchildren taking a turn with the hammer.

"My husband hits it first," Barlow said, "and then the peppermint is hard, so we usually go around the table twice just because the kids enjoy doing it so much."

Ariel Winter's mom sues actor for defamation


LOS ANGELES (AP) The mother of " Modern Family " actress Ariel Winter sued an associate of her adult daughter for defamation Monday, claiming he falsely labeled her an "abusive monster" in an online comment about an ongoing custody struggle for the teenage star.

Chrisoula Workman filed the defamation and false light lawsuit against Matthew Borlenghi , claiming his comment attached to a Nov. 9 Los Angeles Times online story was false and has harmed her reputation.

Borlenghi is an actor who teaches at a studio operated by Shanelle Gray , Winter's adult sister who currently has custody of the 14-year-old actress. A judge temporarily stripped Workman of custody amid allegations she had been physically and emotionally abusive to the star.

A trial on whether Workman will be completely lose custody is scheduled to begin Wednesday.

Borlenghi said he had not yet seen the lawsuit and declined to say whether he posted a comment about the story on the Times website. The story centered on Workman's allegations that Winter was having an improper relationship with an 18-year-old actor.

"This is a total falsehood," the comment attributed to Borlenghi states. "The mother is grasping and clawing to find a way not to lose her money-maker, and hide the fact that she is an abusive monster."

The comment cites personal interactions with Workman for forming the opinions in the post.

"All I can say is that David (Gray) and Shanelle Gray are very close friends of mine and comments that Chris has made are absolutely fabricated," Borlenghi said when contacted about the case. "The negative comments she's made about her own daughter in order to try to get custody back of Ariel are truly disgusting."

Workman's lawsuit includes several pages of sworn declarations from tutors and other friends and associates denying she has been abusive to her daughter. The declarations have been filed in the guardianship case and may be considered by a judge who has to determine whether to allow Gray to continue caring for her sister.

A judge said last month that child protective investigators had evidence of emotional abuse toward Winter.

Workman has denied she has been abusive toward her daughter.

Guardianship cases in California are public record. Attorneys for Winter's sister requested the case and its proceedings be sealed, but a judge refused. The case was filed under Winter's birth name, Ariel Workman , in part to avoid attention.

Although The Associated Press does not generally name underage victims of abuse, Winter's name is being used because it is included in the public guardianship case.

Besides playing Alex Dunphy on ABC's "Modern Family," Winter's credits include appearances on several TV series, including "ER" and "Phineas and Ferb," and movies such as "Kiss Kiss Bang Bang," ''Ice Age: The Meltdown" and "ParaNorman."

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Anthony McCartney can be reached at http://twitter.com/mccartneyAP .

'Zero Dark Thirty,' 'Lincoln' make AFI top-10 list


LOS ANGELES (AP) Kathryn Bigelow 's Osama bin Laden thriller "Zero Dark Thirty," Steven Spielberg 's Civil War epic "Lincoln" and Christopher Nolan 's superhero tale "The Dark Knight Rises" are among the American Film Institute 's top-10 movies of the year.

Also on the AFI top-10 announced Monday: Ben Affleck 's Iran hostage-crisis drama "Argo;" Benh Zeitlin's low-budget hit "Beasts of the Southern Wild;" Quentin Tarantino 's slavery saga " Django Unchained ;" Tom Hooper's Victor Hugo musical "Les Miserables;" Ang Lee's shipwreck story "Life of Pi;" Wes Anderson's first-love romance "Moonrise Kingdom;" and David O. Russell's misfit love story "Silver Linings Playbook."

The AFI also picked its top-10 television shows for the year: "American Horror Story;" ''Breaking Bad;" ''Game Change;" ''Game of Thrones;" ''Girls;" ''Homeland;" ''Louie;" ''Mad Men;" ''Modern Family;" and "The Walking Dead."

Creative ensembles for the films and TV shows will be honored Jan. 11 at a luncheon in Los Angeles.

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Online:

http://www.afi.com

Ancestral Russia lures land-hungry Mexican Mennonites


CUAUHTEMOC, Mexico (Reuters) - More than a century after Mennonite farmers left Russia for North America in search of new lands and religious freedom, hundreds of their descendants in Mexico are thinking about completing the circle.

Shortage of farmland, drought and conflict with rivals have made some Mennonites in northern Mexico wonder if the best way of providing for their families is to go back to the plains of eastern Europe their ancestors left in the 19th century.

This summer a delegation of 11 Mexican Mennonites went to Tatarstan on the southern fringe of European Russia to look at land that could help them protect their spartan way of life from the impact of population growth and climate change.

"We're looking for a future for our children and grandchildren," said Peter Friesen, 59, one of the farmers who traveled to the town of Aznakayevo in August, himself the great-grandson of Mennonites born in the Russian Empire.

Descendants of 16th century Protestant Anabaptist radicals from Germany, the Low Countries and Switzerland, Mennonites rejected Church hierarchy and military service, suffering years of persecution and making them reliant on the patronage of rulers keen to exploit their dedication to farming and thrift.

Many Mennonites like Friesen living in the colonies around the city of Cuauhtemoc trace their origins to families that settled parts of Imperial Russia in modern Ukraine in the 18th century during the reign of Catherine the Great.

During the age of European nationalism, their freedoms came under threat and they began to leave for North America in the 1870s. More followed in the years of turmoil that convulsed Russia during the Bolshevik Revolution and the World Wars.

Still speaking Plautdietsch, a unique blend of Low German, Prussian dialects and Dutch, the Mennonites that came to Chihuahua state from Canada in the 1920s have helped turn some of the most barren expanses of northern Mexico into model farmland yielding tonnes of golden corn, beans, milk and cheese.

But as the fields in Chihuahua grew more plentiful, so did the Mennonites, who are named after 16th century Anabaptist leader Menno Simons, a Frisian. Anabaptists say believers should only be baptized once old enough to understand their faith.

WATER DISPUTE

Dressed in plain cotton trousers, a dark shirt and cap, Friesen uses short, simple sentences in Spanish, his face tanned from years spent harvesting crops under the cloudless skies of Chihuahua, which covers an area bigger than Britain.

Only when Friesen's mobile phone rings and he switches to Plautdietsch does the tempo change. Words trip off his tongue in a much softer cadence than High German, and are all but unintelligible to speakers of the modern language.

"You know we Mennonites always want to grow. And that's what we can't do here. Everything's already taken up," said the father of 13 and grandfather of 25.

Enrique Voth, who also went to Tatarstan, said farmland can be purchased there for a tenth of the price in Mexico. "We need ten times more than what we have," said the father of 11.

The "100 or so" families interested in Russia are still undecided about whether to go, partly because they did not find a single bloc of land big enough for them, said Friesen.

But his blue eyes glitter when he talks of the dark soil, mild climate and rich water supplies the Mennonites found in Tatarstan. Once part of the Mongol Golden Horde, an empire spanning Central Asia and eastern Europe, the republic harbors flat, fertile terrain fed by the Volga and Kama rivers.

Originally about 7,000 strong in Mexico, the Mennonites today farm about three quarters of the irrigated corn fields in Chihuahua. But much of the land is leased and their holdings have increased far slower than their population.

About 1,000 of the first settlers in Mexico returned to Canada, but the Mennonite population in Chihuahua alone is now probably about 60,000, said Peter Stoesz, director of a local Mennonite credit union known as UCACSA.

The Mennonites in Chihuahua started with around 100,000 hectares of land. Today, that holding may not be much more than 250,000 hectares, according to the state government.

Since last year's drought, the land shortage has been felt more keenly, and the Mennonites have been accused by a group of rival farmers known as Barzonistas of sinking 200 illegal wells to irrigate fields, damaging the local water supply.

Chihuahua's government says it has found a few dozen illegal wells, drilled using fake permits. It is still investigating how the permits were issued, and the Barzonistas are not happy.

"We're at a disadvantage, but we're Mexicans," said Barzonista Jacko Rodriguez, who believes the Mennonites have had preferential treatment in the water dispute. "We're going to stay here and we're going to live here. They are not."

The row has taken a number of ugly turns, giving further impetus to the Mennonites' desire to find new farmland.

This summer, one Barzonista declared the pacifist Mennonites were Germans, burning up Mexican lands like the Nazis burned Jews. And when a Barzonista leader was shot dead with his wife in October, some of them pointed the finger at the Mennonites.

"This has caused us a lot of worry," said Johan Peters, 45, a farmer, who said Mennonites were also looking at land in Argentina.

The Mennonites have denied any involvement in the deaths.

PACE OF CHANGE

During the 20th century, Mennonites fanned out into South America, Africa and India. Many preserved a lifestyle tied to tilling the soil, while adopting newer technology often still eschewed by their Anabaptist Amish cousins in America.

Lacking pasture and fields to sow, some in Chihuahua have given up farming, turning to services and handicrafts. A few have drifted into drug trafficking and prostitution, locals say.

But UCACSA estimates over two-thirds work in agriculture, which still dominates the rhythm of daily life. Sons may join fathers to work the fields from the age of 12 or younger.

"Farming is the healthiest work a person can have," said Voth from the Tatarstan delegation. "It's peaceful work without competition. With a business, you have to fight all the time."

Plenty of Mennonites in the area are skeptical the answer to the land shortage lies in Russia. Some say the families considering a move half way across the world have fallen behind. Others worry Mennonites are being swamped by the pace of change.

Though Chihuahua's Mennonites now use mobile phones, many still reject television. Some fret about the impact of the Internet on their children, who can see more and more of the world from the confines of their modest, monochrome bungalows.

"Some people are losing the true reason of being a Mennonite," said corn farmer Corny Kornelsen, 52. "They grab every new thing that comes their way. But they can't cope with all the new technologies."

(Additional reporting by Bernd Debusmann Jr.; Editing by Kieran Murray and Todd Eastham)

Fla. man sues ex-Elmo puppeteer, claims sex abuse


MIAMI (AP) Another man on Monday sued the former Elmo puppeteer who resigned amid sex abuse allegations , claiming the voice actor befriended him in Miami and promised to be a father figure before flying the teen to New York to have sex with him.

The alleged victim is now the fourth to accuse Kevin Clash , who resigned from " Sesame Street " last month after 28 years. The three legal actions filed so far have been civil cases seeking financial compensation.

But the incident with the latest victim, referred to only as S.M., could involve criminal charges because the lawsuit claims Clash transported him across state lines for the purpose of engaging in sexual activity.

Attorney Jeff Herman said he encouraged his client to report the incident to authorities but it's unclear if the now-33-year-old alleged victim has done so.

Sexual abuse allegations against Clash triggered a media frenzy last month. He quickly denied the first claim, which was recanted the next day. But Clash then resigned after a 24-year-old college student, Cecil Singleton, sued him for $5 million, saying the actor engaged in sexual behavior with him when he was 15.

Singleton claims the voice actor met him in New York a dozen years ago after trolling gay telephone chat lines and seeking underage boys for sex.

In the latest case, the plaintiff said Clash approached him on Miami Beach, complimented his appearance and struck up a friendship. Clash returned home to New York, but stayed in touch with the teen, promising to be a dad to him. The youth, who was 16 or 17 at the time, had been molested by a teacher and was considering running away from home, according to the lawsuit.

"These are all vulnerable boys. None of them had father figures in their lives and they were looking for that father figure," said Herman, who represents three of the alleged victims .

The lawsuit says Clash paid for a plane ticket from Florida to New York in 1996 and arranged for a car service to pick up the teen and bring him to his upscale apartment, where he gave him cash and showered him with "attention and affection" and ultimately engaged in numerous sexual acts.

Herman said he is poring over receipts and other documents to see if the car service was paid for by Clash's employers at Sesame Street.

Messages left with a publicist for Clash were not immediately returned Monday.

"We're confident in the actions that we took, but because this is now an issue between litigants, we're not going to comment further," said Ellen Lewis, a publicist for Sesame Street.

Herman said the alleged victims didn't come forward sooner because they were afraid, but have found courage as others have spoken up.

He said they are compliant victims who participated in the sexual acts, but didn't consent because it's illegal for a minor to do so.

"Because they participated in the sex they feel like they're doing something wrong ... they're ashamed, they're embarrassed, not something they really want to talk about," he said.

Herman said he's been contacted by several other possible victims and is vetting their cases.

Springsteen, Lady Gaga join Stones concert in NJ


NEW YORK (AP) Bruce Springsteen , Lady Gaga and The Black Keys will join the Rolling Stones on Saturday for the final concert marking the band's 50th anniversary .

The concert will be held at the Prudential Center in Newark , N.J.

The band said Monday the concert will be telecast live on pay-per-view.

The Stones have played in London and New York on their "50 and Counting" tour. They will also play in Newark on Thursday.

The Stones will perform Wednesday at the "12-12-12" concert at Madison Square Garden in New York City to raise money for victims of Superstorm Sandy.

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Online:

http://www.rollingstones.com/

Judge muzzles Goldman, lawyers at Dragon speech recognition trial


BOSTON (Reuters) - A U.S. federal judge on Monday ordered Goldman Sachs Group Inc to take down statements from its website related to its representation of Dragon Systems in a 2000 sale that blew up when acquirer Lernout & Hauspie went bankrupt after accounting regularities emerged.

A two-month jury trial in the civil case is expected to begin Monday afternoon in U.S. District Court in Boston . Lawyers for Dragon's founders are expected to accuse the iconic Wall Street bank of negligent misrepresentation and malpractice in their opening arguments.

U.S. District Judge Patti Saris began Monday's proceedings by chastising attorney Alan Cotler for talking to a Boston Globe reporter on the eve of the trial. Cotler is representing Janet and James Baker, speech recognition pioneers who agreed to sell Dragon to Lernout & Hauspie in the $580 million all-stock deal that ultimately fell apart.

"You cannot talk to the press," Saris told Cotler, who made an apology to the court. "I don't know why you did."

The judge also expressed concern that Goldman Sachs' public relations team had been making comments to the press on deep background. "That seems to be the case," the judge said.

In addition, Saris ordered Goldman Sachs attorneys to take down the bank's response on its website to a July 15 New York Times story about the case.

"Right now, there's a complete block on talking about the case," Saris told several lawyers assembled in her courtroom in U.S. District Court in Boston.

In 1999, Dragon Systems hired Goldman as its financial adviser. The company was struggling and a potential acquirer opted not to pursue a deal, according to Goldman's defense in the case. The bank says the claims brought by the Bakers are without merit.

Belgium-based Lernout & Hauspie later offered to buy the suburban Boston company for cash and stock. But without seeking Goldman's advice or consulting with her board, Janet Baker, a founder of the company, agreed instead to an all-stock deal, according to Goldman.

Goldman says it recommended to Dragon that it hire professionals to do an extensive review of Lernout & Hauspie's accounting procedures. Dragon chose not to do that, Goldman says.

In May 2001, U.S. Marshals arrested Gaston Bastiaens, a key figure at L&H, at his home in suburban Boston . He was picked up on a Belgian warrant that accused him of fraud, insider trading, stock market manipulation and accounting law violations.

Bastiaens was CEO of Lernout & Hauspie when the 2000 fraud allegations sent the company's stock into a tailspin, erasing nearly $10 billion in shareholder value while forcing the company into bankruptcy protection.

(Reporting By Tim McLaughlin; Editing by Nick Zieminski)

Mandela faces more tests in hospital


PRETORIA (Reuters) - Nelson Mandela , the 94-year-old former South African president and revered anti-apartheid leader, is to undergo more tests in hospital on Monday after having a good rest on his second night in the facility, the government said.

A statement from the office of President Jacob Zuma, who visited the Nobel Peace laureate on Sunday, gave no details other than to say, "President Mandela had a good night's rest" and was "in good hands". It also thanked members of the public for their messages of support.

Defense Minister Nosiviwe Mapisa-Nqakula told reporters after paying Mandela a visit in Pretoria's "1 Military" hospital that he was doing "very, very well". The military is responsible for the health of sitting and former South African presidents.

Mandela, South Africa 's first black president and a global symbol of resistance to racism and injustice, spent 27 years in apartheid prisons, including 18 years on the windswept Robben Island off the coast of Cape Town.

He was released in 1990 and went on to be elected president in the historic all-race elections in 1994 that ended white-minority rule in Africa's most important economy.

He used his unparalleled prestige to push for reconciliation between whites and blacks, setting up a commission to probe crimes committed by both sides in the anti-apartheid struggle.

Mandela's African National Congress has continued to govern since his retirement from politics in 1999, but has been criticized for perceived corruption and slowness in addressing apartheid-era inequalities in housing, education and healthcare.

When Mandela was admitted on Saturday, officials stressed there was no cause for concern although domestic media reports suggested senior members of the government and people close to him had been caught unawares.

The City Press newspaper said both the Nelson Mandela Foundation and his ex-wife, Winnie Madikizela-Mandela , had not known about his transfer to the capital from his home in the remote village of Qunu in the Eastern Cape province.

"I wish Mr Mandela a quick recovery from his sickness so we can be with him all the time. He was a good president, a good leader, so he must be with us," said John Sekiti, a petrol station attendant in Pretoria.

Mandela remains a hero to many of South Africa's 52 million people and two brief stretches in hospital in the last two years made front page news.

He spent time in a Johannesburg hospital in 2011 with a respiratory condition, and again in February this year because of abdominal pains. He was released the following day after a keyhole examination showed there was nothing serious.

He has since spent most of his time in Qunu.

His fragile health prevents him from making any public appearances in South Africa, although he has continued to receive high-profile domestic and international visitors, including former U.S. President Bill Clinton in July.

(Writing by Ed Cropley; Editing by Mark Heinrich)

In giant "garage sale", Japan's TV giants hawk $3 billion of assets


TOKYO (Reuters) - Panasonic Corp, Japan 's struggling maker of Viera brand TVs, owns more than 10 million square meters of office and factory space, dormitories for its workers and sports facilities for its rugby, baseball and women's athletics teams.

As it battles for Christmas shoppers' wallets in the year-end holiday season, the sprawling electronics conglomerate is also seeking buyers for some of those properties to trim its fixed costs and improve cashflow at a time of intense competition, particularly from South Korean rivals such as Samsung Electronics Co.

Japan's other troubled TV makers, Sony Corp and Sharp Corp, are also selling buildings and businesses in a giant 'garage sale' that could raise a combined $3 billion.

Panasonic plans to raise $1.34 billion from offloading property and shares in other Japanese companies by end-March, the group's chief financial officer Hideaki Kawai told Reuters.

"We have a lot of land and buildings in Japan and overseas," he said in an interview at the company's head office in Osaka, in western Japan. He declined to list which properties would go on the block, but said most are in Japan.

Included is a 24-storey central Tokyo block - built in 2003 with more than 47,300 square meters and housing 2,000 Panasonic workers - a source familiar with the plan told Reuters.

Kawai added that Panasonic would raise about a quarter of the sell-off funds by getting rid of shares it owns in other companies - a common practice of cross-shareholdings in Japan.

The proceeds would help bolster free cashflow to 200 billion yen ($2.43 billion) for the business year to March, Kawai said, and allow Panasonic to reduce its debt and maintain its crucial research and development effort as it revamps its business portfolio.

It will sell more assets in the year starting in April if cashflow dips below 200 billion yen, Kawai added. Panasonic President Kazuhiro Tsuga has promised to shut or sell businesses operating at below a 5 percent margin. Those sales could start as soon as April.

Panasonic's fixed assets of $21 billion are around 30 percent more than those of Apple Inc, and are almost double the company's market value. The company, founded almost a century ago as a small electrical extension socket maker, trades at around half its book value - which includes intangible assets such as patents. Sony trades at 39 percent of book, Sharp at 30 percent.

The fixed assets - buildings, land and machinery - of the three companies that were not so long ago a byword for innovation in household gadgetry total around $42 billion, while their combined market value is $24 billion.

CASHFLOW IS KING

The three firms have been downgraded by credit ratings agencies, making it tougher to raise funding on capital markets, and making asset sales more urgent.

Selling assets "is good in terms of their credit ratings because, for all three, it will lower fixed costs and they can reduce their capex requirements. Eventually, this could improve operating margins and, more importantly, cashflow," said Alvin Lim, an analyst at Fitch Ratings in Seoul.

Fitch, which makes its ratings without input from company management, last month cut Panasonic to BB and Sony to BB minus, the first time one of the major agencies has relegated either company to junk status. Sharp is ranked B minus, adding to its borrowing costs.

"We rate Panasonic as investment grade, and it should have various funding options. Selling assets it can do without, to avoid raising additional borrowing, can be an option," said Osamu Kobayashi, an analyst at Standard & Poor's.

While Korean rivals have also benefited from a weaker local currency, data from the Japan Electronics and Information Technology Industries Association shows that Japanese production of consumer electronic equipment fell to just above $15 billion last year from more than $19 billion a decade ago. Output in September was just $980 million, half last year's level.

"The gap with Korean makers seems to be widening. It's going to be very difficult for them to regain their top-tier position," said Fitch's Lim.

As the three Japanese firms, all under new leadership, have sketched out restructuring plans, the cost of insuring their debt against defaulting in 5 years has dropped from spikes just a month ago. Credit default swaps for Sharp and Sony are down to levels last seen 3 months ago, while Panasonic's have dropped 40 percent in the past month.

THREE PATHS

While Panasonic is looking to revamp its business around batteries, auto parts and household appliances, Sony is doubling down on smartphones, gaming and cameras. Sharp, meanwhile, is focusing on display screens and is forging alliances with the likes of Taiwan's Hon Hai Precision Industry and U.S. chipmaker Qualcomm Inc.

Sony may also take the real estate sale route to raise much-needed cash, with a possible sale of its 37-storey New York headquarters, dubbed by New Yorkers as the 'Chippendale' because of its design that is reminiscent of the period English furniture. Selling that jewel could raise $1 billion, media have reported.

The maker of Vaio laptops, PlayStation gaming consoles and Bravia TVs may also sell its battery business, which makes lithium ion power packs for tablets, PCs and mobile phones. The company has been approached by investment banks offering to sell the unit, which employs 2,700 people and has three factories in Japan and two overseas assembly plants. Sony values the business's fixed assets at $636 million.

Potential buyers could include BYD Co Ltd, a Chinese carmaker backed by billionaire investor Warren Buffett, and Taiwan's Hon Hai - which part owns Sharp's advanced LCD panel plant in Sakai, western Japan, and is in talks to buy TV assembly plants in China, Malaysia and Mexico for $667 million, Japan's Sankei newspaper has reported.

Sharp has mortgaged nearly all its properties to secure a $4.6 billion bailout from Japanese banks and so has few assets to offer in a grand garage sale.

Instead, it's selling part of the garage.

Qualcomm has agreed to buy a 5 percent stake in Sharp, making it the largest shareholder. Hon Hai, which earlier this year agreed to invest in Sharp - before its stock slumped in the wake of record losses - has said it remains interested in taking a stake.

"Whatever they can get to get through this fiscal period by scaling down their operation is a critical step for them to remain afloat," said Fitch's Lim.

($1 = 82.4700 Japanese yen)

(Additional reporting by Reiji Murai; Editing by Ian Geoghegan)