Will Nikon be out of business in 5 years?

Started 9 months ago | Discussions thread
Jeff
Veteran MemberPosts: 4,470
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Re: Some corrections ...
In reply to sportyaccordy, 9 months ago

sportyaccordy wrote:

Good post, though I have one question. If cash flow is negative, how are they turning profits? Selling off assets? Also I read their 2012 annual report, and both of their camera divisions have been growing in sales. Not that I am doubting you, I have just been seeing a lot of conflicting information.

This is actually quite common. A big capital investment, for example, requires up front cash that hits the income statement as a multi-year expense following a depreciation schedule. Obviously negative cash flow can be a bad thing. Negative cash flow can also be a good thing if a company is building capacity -- Intel is a great example having made huge investments in Fabs. And positive cash flow can be bad if the company is just hoarding cash without a clear strategy (which is why some people are bearish on Apple right now). So cash flow and income have to evaluated in light of a companies overall strategy and financial position.

As for Nikon I've been referring to the 2013 annual report, available here: http://www.nikon.com/about/ir/ir_library/ar/pdf/ar2013/13annual_e.pdf. Quoting from page 5,

"Net Sales UP 10.0% Revenue increase in Imaging Products contributed to gain, with unit sales of interchangeable lens-type digital cameras rising amid deteriorating market conditions in the second half of the period."

"Operating Income DOWN 36.3% Operating income was negatively affected by market contraction in Precision Equipment, and a deterioration in earnings in Imaging Products during the second half of the period."

Yes, there is a lot of conflicting information being tossed around on these threads. Corporations are complex things, even accurate information can be hard to interpret. It doesn't help when various folks cherry pick data to support arguments.

My personal point of view is always from the perspective of a small-time, value-oriented investor. Is this a company that I'd be willing to add to a diversified portfolio that will fund my retirement? I haven't spent nearly enough time on it to make a personal investment decision, and not sure that I will, but From that perspective Nikon seems to be an intriguing case. The market has already priced in a lot of the negatives, so the valuation seems fair. There's a lot to like from a management perspective.  Compared to the other camera companies, Nikon is a reasonable pure play on the future of photography.  But what's their strategy? Seems to me that is the hard question relative to Nikon, and also makes it a company worth watching.

But all of this has zero to do with whether or not one should buy their products.  Don't confuse the personal value of a company's products to the value of an investment in the company. That's a lesson I learned the hard way decades ago.

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