Olympus-new CEO and disappointing financial report

[MichaelKJ]

TOKYO, Feb 10 (Reuters) - Japanese camera and endoscope maker Olympus Corp (7733.T) said its next chief executive officer would be British-born Michael Woodford, 50, who oversaw a restructuring of the firm's European operations

Olympus on Thursday cut its operating profit forecast for the year ending in March by 9.4 percent to 48 billion yen ($582.8 million), as its digital camera business was hit by a strong yen and intensifying competition.

The revised forecast was below an average estimate of 49.6 billion yen in a poll of 14 analysts by Thomson Reuters I/B/E/S. ($1=82.36 Yen) (Reporting by Isabel Reynolds; Editing by Edmund Klamann

http://www.reuters.com/article/2011/02/10/olympus-idUSTOE71904620110210

Third quarter camera sales for 2010 were 36.9% below third quarter 20009 sales.





http://www.photoscala.de/Artikel/Olympus-Neuer-Chef-soll-es-richten

http://www.olympus-global.com/en/corc/ir/brief/pdf/n110210aE_n.pdf

 

[Alexsfo]

Even though they have such succesfull PEN product line; it's probably still more of a niche market...I would assume that their P&S cameras don't sell nearly as well as Canon, Lumix or Sony...The competition in this area is so tough that it requires some significant resources to survive. I still want to see what E-P3 will have to offer.

 

[Bilgy_no1]

Exactly, I think the biggest hit is in the compact market, where Olympus has really ignored developments for a long time. Hopefully the XZ-1 signals a change in strategy there.

PEN has been a good move, looking at the declining DSLR market share over the years (I think the E-520/E-420 was perhaps the last generation of DSLR's that sold in decent numbers, but only at low prices). Still, competition is tough and Olympus need to follow through. I think the biggest challenge is to get the cameras on the relevant store shelves and have salespeople recommending their cameras (PENs vs. DSLRs).

Even though they have such succesfull PEN product line; it's probably still more of a niche market...I would assume that their P&S cameras don't sell nearly as well as Canon, Lumix or Sony...The competition in this area is so tough that it requires some significant resources to survive. I still want to see what E-P3 will have to offer.

--
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[tinternaut]

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J

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Gear in profile

 

[tinternaut]

Olympus has good ideas but needs new thinking. The new thoughts don't have to be Japanese. Sony has done well with its Welsh CEO after all .

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J

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Gear in profile

 

[Tim in upstate NY]

Even though they have such succesfull PEN product line; it's probably still more of a niche market...I would assume that their P&S cameras don't sell nearly as well as Canon, Lumix or Sony...The competition in this area is so tough that it requires some significant resources to survive. I still want to see what E-P3 will have to offer.

. . . There are a lot of us waiting on that E-P3.

 

[sderdiarian]

Not upgrading the E-620 and essentially abandoning the DSLR class of cameras couldn't have helped, especially with its impact on lens sales. But this also corresponds with the biggest international economic downturn since the Depression.

I'm hopeful a western CEO will make this company more in tune with its international customer base, not just Japanese, and help rid it of what at times comes across as arrogance bordering on deafness.

Their recent compact intros including the XS-1 and the slim SZ-10 superzoom are promising, as is the E-PL2. A full-featured mFT body (built-in EVF, flip 3" OLED, AF assist, IBIS) would certainly help as well. We'll see.
--
Sailin' Steve

 

[AlanKl]

While down 10% from last year, Olympus does $10 billion in sales, not a small company. They have $500 million in operating profits or 5%. Only 20% of sales are for cameras, The rest are endoscopes, microscopes and other medical equipment and other products. So even if their camera market is suffering, it still represents a small part of the strengths of the coporation.

Apparently the new president was selected because because he's a foreigner. Being non-Japanese, he will be able to slash costs by trimming staff and typical Japanese procedures that have traditional opposition to change. The new boss did this in their European division. I don't know what success this boss will have with R&D. But they obviously hired him to get sales back on track and to increase profits by slashing internally.

What this portends for their camera line will be interesting to see.

http://www.olympus-global.com/en/corc/ir/summary/

 

[BrianKnoblock]

I assume the P&S market has got to be getting hammered by the cell phone camera, even if its only a few percent of users switch to their phone camera as a point and shoot , thats takes a ton of users out of the market.

BK

 

[amalric]

I am not sure how to read the Excel table. Is the first column about Endoscopes or Cameras?

At any rate the contraction in sales might be entirely due to the Yen going up. It would be useful to compare to the other manufacturers, see how they fared.

It is most probable that Oly lost the European (main) and US market going mirrorless. Sales of the latter are strong only in Japan and predicted to grow in Asia.

So to have a hint about the future one should watch how the competition is faring there.

Is Olympus camera market share growing or falling? As far as I remember it grew substantially after the introduction of mirrorless, doubling in respect of years previous to 2009.

Am.
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[MichaelKJ]

Third quarter 2010 camera sales were 26% below third quarter 2009 sales, and camera sales declined from 19.0% of Oly's total sales to 14.7%.

Nikon recently released its third quarter financials. Below is Thom Hogan's summary:

Overall, the company reported an increase in sales and profit, mostly due to a recovery in the Precision division's sales of semiconductor manufacturing equipment. The Imaging division was a different story: slightly down in year-to-year sales and profit, but up in unit volume, especially Coolpix models.

Nikon sold 1.25m DSLRs, 1.85m lenses, and 4.9m Coolpixes in the last calendar quarter of 2010. That represents a slight increase in DSLR sales, a modest increase in lens sales, and a whopper of an increase in Coolpix units (20% year to year). Nikon called the DSLR and lens sales "favorable results" and blamed the lower sales and profit on the strong yen. Nikon changed none of their estimates for the full year (4.25m DSLRs, 6.35m lensess, 14m Coolpix).

The big question for Oly is how the new CEO will view the camera division. Hopefully, he will see it as an opportunity to enhance his status by making it profitable. However, as an outsider with a reputation as a cost cutter, the pessimistic view is that he could decide that the best way to increase the stock price and make the company more profitable is to sell off the imaging division.

 

[amalric]

The big question for Oly is how the new CEO will view the camera division. Hopefully, he will see it as an opportunity to enhance his status by making it profitable. However, as an outsider with a reputation as a cost cutter, the pessimistic view is that he could decide that the best way to increase the stock price and make the company more profitable is to sell off the imaging division.

Would you sell a division only because of a fall in profits for the first quarter? Because if you look at the profits column there was a strong recovery between 2009 and 2010.

Selling might be a consideration, but the last I read from Oly camera div. was that they gave themselves 5 years to double profits. So LT expected sales and Market Share might be a consideration too.

Am.

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[grapher]

I hope this new CEO has some new ideas about how to run an Imaging-Corporation.

Given a 17% share of the Olympus business (+ - 3% depending on the way and time-span you are looking at) is in imaging, and that part is burning money year after year ..... the easy way out for the new CEO would be the way we all dread!

 

[Shotted]

Olympus has good ideas but needs new thinking. The new thoughts don't have to be Japanese. Sony has done well with its Welsh CEO after all .

--
Regards
J

Yes, the Nex interface is definitely Welsh,
Don

 

[BigBarney]

Third quarter camera sales for 2010 were 36.9% below third quarter 20009 sales.

These articles accurately identify Olympus as a company primarily in the business of endoscopes and digital imaging systems.

Ever since I owned an Olympus 35RC film camera in the 1970s (I still have it and it still works fine) I have appreciated the quality of their imaging products. Others have identified that previous Olympus statements have been typically Japanese in their emphasis on the long term prospects for sales and profits growth. What these commentators and internal Olympus strategists may have failed to recognise is that in the long term there may be no markets for their products, or at least significantly reduced ones.

As well as being an amateur photographer, I once worked professionally in the medical imaging busness, so I will try to keep this simple. Endoscopes essentially come in two main flavours/flavors:

• those that are inserted into the upper end of the alimentary canal.

• those that are inserted into the lower end of the alimentary canal.

The lower ones are the most frequently used at present. However these medical applications are rapidly becoming obsolete as they are replaced by fast X-ray CT scanning. This newer technique is both more patient friendly and sensitive and specific in detecting early signs of bowel disease.

In short the market for large bowel endoscopes is as attractive in the long term as the market for kerosene lamps was when Swan and Edison came onto the scene.

Q. So where does that leave Olympus?

A. Between a rock and a hard place.

I think their new CEO will have to come to terms with options for the imaging business such as:

• outsourcing all camera and lens production to countries with weaker currencies than Japan.

• severe pruning of imaging product lines.

• raising prices on 'successful' niche products.

• focusing Research and Development effort onto fewer product lines.

• more technology sharing with Panasonic on m43 systems. Imagine what we could have if both companies worked together and competed more effectively against the likes of Sony!

• selling the imaging business or even the whole business.

Olympus started life as an optical company and has been obliged to develop skills in the electronic fields. By contrast Sony and Panasonic are the other way round. They have developed their own electronic technologies and formed collaborations with optical companies. Panasonic wisely decided to collaborate with Leica and in the m43 and smaller fixed lens camera fields we have seen some great lenses coming from this collaboration.

 

[ogremage]

Time to kill off 4/3 and shift all energy into m43.

 

[Bilgy_no1]

Third quarter camera sales for 2010 were 36.9% below third quarter 20009 sales.

These articles accurately identify Olympus as a company primarily in the business of endoscopes and digital imaging systems.

Ever since I owned an Olympus 35RC film camera in the 1970s (I still have it and it still works fine) I have appreciated the quality of their imaging products. Others have identified that previous Olympus statements have been typically Japanese in their emphasis on the long term prospects for sales and profits growth. What these commentators and internal Olympus strategists may have failed to recognise is that in the long term there may be no markets for their products, or at least significantly reduced ones.

As well as being an amateur photographer, I once worked professionally in the medical imaging busness, so I will try to keep this simple. Endoscopes essentially come in two main flavours/flavors:

• those that are inserted into the upper end of the alimentary canal.

• those that are inserted into the lower end of the alimentary canal.

The lower ones are the most frequently used at present. However these medical applications are rapidly becoming obsolete as they are replaced by fast X-ray CT scanning. This newer technique is both more patient friendly and sensitive and specific in detecting early signs of bowel disease.

In short the market for large bowel endoscopes is as attractive in the long term as the market for kerosene lamps was when Swan and Edison came onto the scene.

Q. So where does that leave Olympus?

A. Between a rock and a hard place.

I think their new CEO will have to come to terms with options for the imaging business such as:

• outsourcing all camera and lens production to countries with weaker currencies than Japan.

• severe pruning of imaging product lines.

• raising prices on 'successful' niche products.

• focusing Research and Development effort onto fewer product lines.

• more technology sharing with Panasonic on m43 systems. Imagine what we could have if both companies worked together and competed more effectively against the likes of Sony!

• selling the imaging business or even the whole business.

Good analysis that shows that all the markets are continually shifting due to technological change. One way out would be what is called a 'blue ocean strategy': create a new market with a radically new value proposition. This is exactly what Olympus/Panasonic have done with m4/3 and it has been partly successful. Olympus market share in ILC has not been higher since at least the launch of the E-1 I guess. How it plays out in the longer term is unknown: Samsung and Sony have quickly followed suit, with the latter being rather successful. As is often true, the first mover doesn't necessarily capture the market.

Maybe, the change hasn't been radical enough. E.g. the PENpal is a good idea, but why isn't there an Android App to communicate with the E-PL2? There are many ways in which Olympus can build on the PEN foundation. Wonder if the new CEO is going to make any changes in the DC division, but it seems almost obligatory.

Olympus started life as an optical company and has been obliged to develop skills in the electronic fields. By contrast Sony and Panasonic are the other way round. They have developed their own electronic technologies and formed collaborations with optical companies. Panasonic wisely decided to collaborate with Leica and in the m43 and smaller fixed lens camera fields we have seen some great lenses coming from this collaboration.

--
http://www.flickr.com/photos/bilgy_no1

 

[DLBlack]

I really would like an Olympus m-4/3 camera but they haven't built the camera or lens system that I will spend my money on. Where is the pro-level m4/3 camera body with rugged weather-sealed body and fast weather-sealed, rugged lenses with lens hoods.

Dave
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[tgutgu]

Nobody of us can probably say if the PENs and on the same token the Lumix Gs are really successfull in the view of the manufacturer. If the return on investments does not fulfill the expectations, the product might not be considered successfull.

Even if PEN sales are larger than Lumix G sales, that does not indicate that a PEN is the more successfull product. It all depends how much investment was necessary and how the development cost would fit in the rest of product line. Panasonic's m4/3 investments could be very beneficial for the video department as well, while Olympus m4/3 investments should stand on its own - I don't know.

What is scaring is that Olympus only had a moderate success in Japan, but a terrible success in all other markets. Whether this is despite of the PENs or because of the PENs, cannot be concluded from the numbers. Judging from what you see in the field in Germany, it is hard to believe that PENs are that popular. Lumix G might have a bit more market share, but in comparison to the DSLR sector, both aren't significant.

Therefore, I think that the m4/3 manufacturers should not play only one game. The deal m4/3 offers is that you can combine both worlds: compact camera bodies for portability and small, ambitious DSLR-like bodies for more demanding stuff, both with the same lenses. In this sense, the Panasonic strategy is more convincing than Olympus' PEN-only thing. Both produce fine cameras. But m4/3 makes only sense as a system, when people tend to invest in it (lenses), which is less likely with a too narrow approach. (Actually Panasonic has even a three-type body concept approach: small: GF2, versatile: G2, GH2, video: AG-AF 100).

Even though they have such succesfull PEN product line; it's probably still more of a niche market...I would assume that their P&S cameras don't sell nearly as well as Canon, Lumix or Sony...The competition in this area is so tough that it requires some significant resources to survive. I still want to see what E-P3 will have to offer.

--
Thomas

 

[Everdog]

Last year was there any Olympus P&S camera worth buying?

The largest part of the camera division is P&S...and it's killing Olympus. They have said all along that the PEN series is the only bright spot in their camera division, but it is only a tiny piece.