Olympus profit - the cat is out of the bag (a little early)

Started 9 months ago | Discussions thread
Eamon Hickey
Veteran MemberPosts: 3,100
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can we kill this nonsense?
In reply to Lab D, 9 months ago

Lab D wrote:

The camera division does not need to profit according to Olympus. They said it is the R&D for the highly profitable medical division.

First, they did not say the camera division doesn't need to be profitable. Far from it -- at every earnings announcement they strongly reiterate their determination to make cameras profitable.

What the company actually said was that R&D conducted for the camera division had some spillover benefits for the medical business. This was presented as a mitigating factor to the division's losses -- i.e. "yes, the camera division is losing money and that's bad but we do get some R&D benefits from having a camera division, which helps balance the equation to some degree."

Two things about this: first, it's a fairly defensive statement -- it was made by a set of company managers that is desperately trying to fend off criticism from investors about the continual losses from cameras. Many Olympus investors want the company to abandon cameras, but the company's management doesn't want to.

Second, it's actually a really mundane statement about the benefits of diversification. It is undoubtedly true that companies that are doing R&D in different but loosely related fields sometimes get crossover technology benefits that they probably wouldn't have discovered if they had concentrated their R&D on only one product line. But this is true of all companies; Olympus is not special in this way. Nikon, for example, often talks about the spillover to cameras from the R&D they do for their stepper division. Their "Nano-Crystal" lens coating is the latest such crossover benefit, according to them.

There is no way that Olympus's camera division can be considered the R&D section for their medical division -- and Olympus never said it was. The medical division has its own R&D section, obviously. I'm sure they get some crossover R&D benefit from cameras to their medical products, but that has to be balanced against all the money cameras are losing. At some point, if you are a responsible manager you have to say, "let's figure out how to preserve our diversified R&D efforts without throwing away hundreds of millions of dollars turning that R&D into money-losing products." That's a pretty simple idea.

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