Olympus Results - Seriously Bad Financial Forecast

Trinurse

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Just read Thom Hogan's assessment http://www.sansmirror.com/newsviews/olympus-results.html of Olympus' FInancial report http://www.olympus-global.com/en/ir/data/annualreport/2013/ and, while the financial aspect is very grim, they seem committed to the high-end, high-margin sector of the mirrorless market. They report posting a 23 billion yen loss last year but seem to have recognized the mistakes they've made and are committed to recovery.

I agree with his assessment:
Olympus reported their full fiscal year results today, and the news is grim for the Imaging group. I’ve updated my overall article about the industry on dslrbodies.com and my Claims to Remember on this site, but let me give you the short version:

Olympus failed to meet their m4/3 camera expectations. They missed their own mirrorless sales forecast by 41%. In terms of actual unit volume, the original estimate for mirrorless was originally 660k units for the year. That dropped all the way down to 610k units during the year. Actual was apparently 510k units [source Credit Suisse], which is below last year’s mirrorless sales by Olympus. This represents almost exactly a 15% share of the CIPA mirrorless shipment numbers for the same period.

Olympus lost money at cameras (again). It’s been a bit of a broken record: Olympus would forecast break-even for the group, then the results would indicate that they didn’t make it. This year, they didn’t make it by 4.2b yen. For the first time I can remember, they’ve given a negative assessment for the coming year: they expect another significant loss in the coming year.

One third of the cameras Olympus is selling are going into Japan, and that was down 5%. All other markets were down in double digits.

SG&A costs are still above 50%. Overhead, marketing and selling those cameras costs them more than making them does.

Olympus will sell less in the coming year than last. Going by their forecasts, they are still in a declining position in terms of overall sales numbers, though they ascribe most of that to a huge reduction in compact camera sales. If I’m reading the numbers right, Olympus expects to sell about 1.5m total cameras in the coming year. Under my most optimistic forecast for total global camera sales, that represents 3.5% of the market; under CIPA’s current forecast, that represents 3.1%.

Make of that what you will. My take is that Olympus simply hasn’t cracked the code that will make them money and grow their camera business. That’s a shame, because the EM-1 and EM-10 are very nice cameras (reviews coming), and Olympus has a fine set of lenses.
I just hope Olympus' management has the insight and wherewithall to keep it together and not jump from a sinking ship.
 

OzRay

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Thom Hogan has been predicting doom and gloom for years. If you make enough predictions, some must come true eventually.
 

OzRay

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The major issue that affected Olympus was the financial scandal, anything about Olympus has to take that into consideration, as it affects the entire company. Merging the divisions isn't necessarily a bad thing, as both sides are effectively involved in optics and imaging, but for different purposes.
 

GBarrington

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I don't think this is something I want to worry about. The Olympus Camera intellectual property is SO important that I don't think Olympus Cameras would go without a highly solvent buyer if it needed to be sold.

The major worry isn't really, "will Olympus survive?" But rather, "would the changes forced upon it by economic circumstances, allow it to remain the quirky non-standard camera manufacturer it has been for at least 50-75 years?" If it is forced to become "micro-Canon", and only take the safe route, I doubt I would want to buy their products.
 

GBarrington

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The major issue that affected Olympus was the financial scandal, anything about Olympus has to take that into consideration, as it affects the entire company. Merging the divisions isn't necessarily a bad thing, as both sides are effectively involved in optics and imaging, but for different purposes.
This just occurred to me, but merging the two divisions actually can serve to protect Olympus Cameras. Once they are merged it becomes much more difficult to fall prey to the "let's sell the camera division" crowd.
 

OzRay

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This just occurred to me, but merging the two divisions actually can serve to protect Olympus Cameras. Once they are merged it becomes much more difficult to fall prey to the "let's sell the camera division" crowd.
Having said that there are synergies between the two divisions there is, on the other hand, the potential for the dominant imaging division to affect the running and future development potential of the camera division. However, if that forces the camera division to re-evaluate what it's producing and makes them focus on value adding products, then it may not be all bad. The first move should be to reduce the number of cameras being made, in both P&S (significantly) as well as M4/3s. Secondly, the camera division should become more proactive in marketing; the imaging division is out there in industry all the time promoting and avidly looking for sales (especially in the medical field). The Olympus camera division barely knows what marketing means. Thirdly, the camera division should re-evaluate what they can produce, to make their 'reduced' camera inventory more attractive and profitable. Olympus could be akin to the 'Porsche' or such of the camera world, where being a small producer (under the VW group) doesn't mean being an unprofitable one.
 

cptobvious

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Their SG&A expenses are off the charts. For the past three years, these expenses have gone from 41% of net sales, to 46% (last year), to 51% (this year), mainly due to falling sales. Even though they claimed they would achieve profitability in the past partly by cutting these expenses, it looks like they paid out more in advertising, salaries, and bonuses in FYE 2014 than 2013. The recent lawsuits by Japanese banks against Olympus could be the tipping point.

Realistically, there'll have to be some consolidation in the mirrorless industry as there are too many players and the demand is not there. For the Micro 4/3 line, I think Oly and Panny should be having discussions about merging the line into/under one company.
 

bobpur

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I just take pictures, I'm sure even if Olympus closes down my cameras won't suddenly stop working.
 

broody

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Both Oly and Panasonic have already reacted to the contraction of the camera market. Both are releasing less models this year, and IMO they are putting out much more intelligently designed bodies lately.

About Olympus missing their sales forecast: I remember reading this is because it was a ridiculous figure to begin with. They sold 260k units in Q1/Q2 and raised their forecast to 400k for Q3/Q4. Yeah... was never gonna happen.
 

bikerhiker

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The only good news out of this is that Olympus is predicting that they will continue loosing money in future sales. A big shift from denial to final acknowledgement and moving forward positively I hope.:smile:
 

marcsitkin

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On a positive note, it was good to see Olympus place some commercials for the EM-10 on the BBC America broadcasts of "Orphan Black". Pretty popular show, hopefully they will get a sales boost as well as an increase in Brand Awareness.
 

fsuscotphoto

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This weekend Orlando had one of the traveling Oly shows. I was unable to attend but from what I understand it was a very successful event. Another problem, as I see it, is perception. I listen to a lot of podcasts. Most of them rave about the OM-D series. Then then turn around and rave about the mirrorless cameras with APS-C sensors and full frame sensors. I think that those that haven't tried a Oly only hear one thing: larger sensor.
 

BobbyTan

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This weekend Orlando had one of the traveling Oly shows. I was unable to attend but from what I understand it was a very successful event. Another problem, as I see it, is perception. I listen to a lot of podcasts. Most of them rave about the OM-D series. Then then turn around and rave about the mirrorless cameras with APS-C sensors and full frame sensors. I think that those that haven't tried a Oly only hear one thing: larger sensor.
Most people have been brain-washed into thinking that a bigger sensor is better. Well, they are not wrong. A larger sensor is better … but there are trade-offs. A larger sensor means the lenses have to be larger - significantly bigger and heavier - and more expensive too.

Do I want to see an Olympus camera with a FF sensor? Not really … not unless they can keep the current line of m43 lenses - which is just not possible. So I am hoping to see some significant advancement in sensor development … so the m43 sensor of tomorrow will be as good as a FF sensor of today i.e. in the class as the Nikon D800e and Sony A7r sensor. And I believe it's just a matter of time before we get there.
 

bikerhiker

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One word. Confidence!

People have confidence in both Nikon and Canon and therefore they will always command the majority of the market share. Fuji, Olympus and Panasonic with Ricoh Pentax will always pick up the pieces of what's left.

The Chinese has a proverb -- Chaos brings opportunity. This is a chaotic time for the photographic industry. Everyone is downsizing R&D as well as manufacturing trying to cut costs and consolidate models, except Nikon. Still, you need people to continue spending money and I fail to see how Olympus is going to convince people to keep spending on cameras that essentially have the same megapixel and not much gain elsewhere.
The reason why both Nikon and Canon have been brain washing their customers to upgrade to full frame is that, there is a goal for people to spend. This is no different than in America itself, where we pump up the "American Dream". For what purpose? To get people to dream that they have a chance to make it big and rich, but then it serves no spiritual service other than for bragging rights. This is good business. Apple Inc. uses this on their iPhone marketing and so does Samsung. That's why they succeed. If you can not get people to continue spending money, then your business will not survive for very long. So having Olympus produce a full frame isn't a bad thing. Right now, what Olympus has to do is stop the defection of their own m43 customers like they did in the 80s and 90s when they REFUSED to turn their prized manual ZUIKO lenses into AF capable lenses like Nikon and Canon and completely lost out the AF race. I know some stores here that have decided not to carry anymore m43 stuff because it's more profitable to sell Fuji and Sony. Why carry m43 only to have the products backordered. They get customers trading in their m43 equipment for Canon, Nikon, Fuji and Sony. You simply can't continue this defection rate if Olympus insists things are status quo. I think they know this as their sales would probably tell.
 

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