Will Nikon be out of business in 5 years?

Started Oct 28, 2013 | Discussions thread
Jeff
Veteran MemberPosts: 4,470
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Some corrections ...
In reply to marike6, Oct 30, 2013

marike6 wrote:

Nikon is one of the two most profitable camera companies in the world so if the assumption is that Nikon will be out of business in 5 years so will ALL of the other companies who aren't even profitable now in the digital age.

Nikon is one of the oldest camera companies having been around since 1917. They have influenced and adapted to every single change in the market and they will adapt to a decrease in compact sales just fine. Compact are only a small part of Nikon's business.

And they don't only make cameras, but also produce world class optics, and are one of world's largest manufacturers of steppers, which are used for semiconductors.

Smartphones (which I'm not sure should even qualify as real cameras) will affect only a small part of Nikon's overall business. And since they make optics, enthusiast cameras, and support a huge network of professional photographers with their SLR system, they will be just fine.

Nikon's net income and revenue are all up, something the armchair Nostradamus who wrote the IDC article neglected to mention. Besides that, Nikon is owned by Mitsubishi, Japan's largest trading company for whom Nikon is still extremely profitable,unlike some other camera companies / camera divisions...cough, cough...Olympus, Sony, Panasonic, Samsung, Pentax.

No, Nikon is not in any sense 'owned by Mitsubishi'.

Nikon is part of the Mitsubishi keiretsu -- a horizontally organized group of companies characterized by common banking and insurance providers, and interlocking relationships.

Nikon is primarily equity financed with relatively little debt. Only 14% of the capital is debt. Equity ownership is highly diversified, the largest owner holding just over 4%, and top owners holding only 11%. The top investors, by the way, are also top Japanese and global funds. Members of the Mitsubishi keiretsu to hold some of the bonds, but that's a small piece of the overall capital structure.  Investors of this quality don't tolerate fools -- the Nikon executive team is organized with clear P&L accountabilities, and their annual report is very well done.

Is Nikon extremely profitable? They are making a profit, and the current camera industry that alone is a decent result. But that's not without qualification. Cash flow has been actually been negative for the last two years. Earnings on equity is ok but not great, in the 6% range. Their three major businesses are all facing strategic issues (Imaging, which makes up 75% of Nikon's revenue, is in period of rapid change. AMSL is eating their lunch in the photolithography equipment market. And Instruments is a money loser).

So is Nikon extremely profitable? No.

Nikon stock price has been falling recently, back to 2010/2011 levels when they were recovering from an unprofitable year. As much as anything, that seems to be a good indicator of how investors are evaluating Nikon's business prospects.

To my value investing eye, Nikon may be a company to watch. They're in a situation where good management can make huge differences and will reward a careful investor. But that's not a game for the timid. You have to be willing to tolerate the same risks as major fund managers, and are truly diversified.

http://investors.morningstar.com/ownership/shareholders-overview.html?t=7731&region=jpn&culture=en_US

http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=7731:TYO

https://www.google.com/finance?cid=669276

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