Olympus has today said that it is looking to bring its digital camera operations into the black after a tough time last year. Olympus are looking to shift a large amount of its domestic digital camera production to China. "Our biggest problem this business year was inventories,'' Yusuke Kojima, senior manager for sales and marketing in Olympus's imaging systems group, told a news conference. "Digital cameras have been hit by intensely competitive conditions.'' Like personal computers, he said, digital cameras now have a very short shelf-life because of the rapid emergence of new models.

Olympus eyes turnaround in digital cameras

By Edmund Klamann (Reuters)

TOKYO, Jan 7 (Reuters) - Olympus Optical Co Ltd said on Monday it aimed to put its digital camera operations back in the black in the next business year by speeding up decision-making and shifting some of its manufacturing to China.

Olympus, which is battling with Sony Corp for the number-one spot in the global market for digital cameras, has been hammered by the market's growing pains and saddled with a hefty backlog of unsold stock.

"Our biggest problem this business year was inventories,'' Yusuke Kojima, senior manager for sales and marketing in Olympus's imaging systems group, told a news conference. "Digital cameras have been hit by intensely competitive conditions.''

Like personal computers, he said, digital cameras now have a very short shelf-life because of the rapid emergence of new models.

Faced with inventory write-downs and falling prices, Olympus projected an operating loss of 11.2 billion yen ($85.6 million) in its digital camera operations in the business year to March 31, dragging its imaging systems division to a loss of 7.8 billion yen despite modest profits on film cameras and recording devices.

"If we do that again next business year, it'll be our heads,'' said Hiroshi Komiya, head of the division.

In 2002/03, the division is aiming for an operating profit of five billion yen, a 10 percent reduction in costs and a halving in the time it takes to turnaround inventory.

SLOWING GROWTH

Olympus plans to shift the bulk of its domestic digital camera manufacturing to China, but added it expected no job cuts at home, where design and product development operations will be strengthened. It also plans to consolidate its sales structure.

The company has already restructured and shifted to China a large portion of its film camera operations, which are forecast to turn a modest profit of three billion yen this business year.

Digital still cameras have been one of the fastest growing consumer electronics markets in recent years, although the pace is expected to slow this calendar year to 22 percent -- to 18 million units -- compared with last year's torrid 47 percent growth.

"The fast growth in the market allowed us to get a bit out-of-touch, and I think that was true for other companies as well,'' Komiya said. "Competition is very intense in this sector,''

Canon Inc, a relative late-comer to digital cameras, raised the heat by assaulting the market over the past year with a slew of new products that steadily boosted its market share.

Olympus aims to sell four million digital cameras in the next business year, up 25 percent from this year, although rapidly falling prices mean that revenues are forecast to grow only 3.7 percent, to 140 billion yen.

The company also said it aimed to strengthen its ties to original equipment manufacturing (OEM) partners, including Sanyo Electric Co Ltd , which produce 70 percent of its digital cameras in terms of value.

Although Olympus's digital camera woes have weighed on profits, it continues to enjoy strong sales of diagnostic endoscopes, where it makes most of its profits and holds a commanding 70 percent share of the global market.

Given its heavy reliance on exports, it has also benefited from the recent weakening of the yen, which boosts the value of overseas income when it is converted into the Japanese currency.

Olympus's share price hit a seven-month high of 1,970 yen on Friday although it retreated on Monday, falling 2.91 percent to close at 1,900 yen.