Canon doesn't really care anymore...

Started Feb 7, 2014 | Discussions thread
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John Koch
Regular MemberPosts: 446
A good industry analysis by a seasoned observer
In reply to David_C, Feb 10, 2014

Hogan knows more than his critique combined about the camera industry. He is a Nikon enthusiast, but manages to write interesting and informative things about many companies and their gear.

Hogan takes time to look at manufacturers' financial reports, which is beyond the attention or skill set of some folks, but essential to figure out where the industry is headed.

Nikon is easier to analyze (hence more transparent) than other companies mainly because camera account for a greater share of its revenues than other firms. That does not mean, however, that the company is sitting pretty. The investment in mirrorless V and J cameras failed to turn an adequate profit.

Canon's revenue statements mix camera and printer sales, making it harder for the outsider to figure where profits are coming from, or not.

Sony, Panasonic, and Olympus are even more complicated, and cameras are only a tiny contributor to sales.

Hogan does not challenge Canon's dominance of the camera market, but merely points out that the company has not made any dramatic attempts to counter the dismal market outlook for sales.

Analysts who attended the financial results meeting in Tokyo and who cover Canon seem a bit non-plussed, with several remarking about how blasé Canon appears about the lack of unit volume growth in cameras. None of the countermeasures mentioned in their presentations really addresses the declining unit volumes in cameras.

Canon is blasé because it can be, whereas its competitors cannot. Managment might chose different words (perhaps "keeping cool" rather than blasé), but the plain truth is that the company has taken rather cautious cost-cutting steps, rather than overhaul products radically and paddle against the phone-camera current. A T5i is pretty much a re-warmed T4i, which is a near clone of a T3i, which could be mistaken for a T2i, and so on. Canon will probably be last to the party with regard to adding 4k video to cameras.

Such caution probably makes a lot of financial sense: when the market is shrinking, any R&D spent on the leading edge is likely to come to naught. Management probably hopes that unit volumes will stabilize at a lower global equilibrium than in the past, but that Canon's share of that market could rebound after less profitable competitors discover that it is simply impossible to make money selling cameras any more.

We don't know what the structure of the global camera or imaging market will be in 5 years, other than this: there will a be a huge dominant section, dominated by phone cameras, a significant market for industrial and security cameras, and then a professional / commercial imaging sector dominated by the Canon-Nikon duopoly, but trailed by dozens of smaller firms we probably haven't heard of, yet will buy out technical rights to stuff we now associate with other names.

Fuji, Olympus, Sony, Panasonic, and Ricoh might be better off spinning off all their camera businesses. Better to invest in things that will make money.

A word of caution I'd add to Hogan's remarks about Sony (that camera results may have stabilized or become slightly profitable) is that the December quarter's results were clouded by yen fluctuations, and that "operating profits" are stated before restructuring costs, interest expense, or overhead.  Sony is still not out of the woods.  Moody's sure did not think so when it downgraded the firm's debt to Ba1 two weeks ago.

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