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Olympus to exit Camera business

Olympus to exit  Camera business

Legendary Camera maker Olympus has announced that it is exiting the camera business following losses in three consecutive financial years. Olympus has signed a definitive agreement with Japan Industrial Partners(JIP) to hive off the imaging business of Olympus into a new company and transfer the shares to JIP.

Olympus journey began with when it launched a photographic camera with Zuiko lens in 1936. Recently it was selling the Olympus OM-D digital interchangeable lens mirrorless camera. It had many innovative cameras including half-sized camera Zuiko Pearlcorder in 1969.

Olympus Pearlcorder – World’s first microcassette recorder



In the recent times its OM-D series cameras were popular.

When Nokia added a camera to its phones, the photographic industry was too slow to understand its implications. Today, the smartphones sales have sky rocketed and the phone manufacturers have enormous amounts of money to conduct R&D to improve the camera function. The small sensor size in the mobile phones have inferior light gathering capacity than the compact cameras and DSLRs. So the mobile manufactuers focused on improving the software which can process the signal from the small mobile camera sensors and create better images. The high volumes of the smart phone sales have given the mobile manufacturers lot of money to invest in R&D to improve the mobile phone camera and software processing functions. Also, the ability to immediately click and directly upload the photos to the social media profiles helped in the impulsive nature of social media users. So compact camera sales virtually vanished in a few years. The high end smartphones have now improved in terms of camera function and hence many DSLR users are also using the phone as it is handy. So camera manufacturers are now in the backfoot. Olympus was the first to sell off in the recent times because Olympus failed to see the trends. People wanted videos in their cameras and Olympus tried to remain as a tool for still photographers.

The future also looks bleak as now phone manufacturers are working on multiple cameras with multiple lenses to simultaneously shoot different perspectives. So smaller camera manufacturers are increasingly under pressure. Even niche high-end camera manufacturer Hasselblad a couple of years ago was sold of to chinese drone maker DJI.

Sony corporation had tried its hand in mobile phones when camera was not a much of a feature in mobile phones. Recently high-end cinema camera manufacturer RED tried to launch a smartphone that was supposed to act as an extension of high end cameras. However, the project titled Hydrogen had very poor execution and had to be shelved after the initial iteration.

Now Smartphone makers have more money to buy out camera manufacturers, if they want. However, most of the smaller camera manufacturers are more likely to be bought and asset stripped. This news of Olympus selling its camera business is a sign of things to come in future. Following is the complete press release by Olympus.



News Release

Company: Olympus Corporation Yasuo Takeuchi, Director, Representative Executive Officer, President and CEO (Code: 7733, First Section, Tokyo Stock Exchange)

Company: Japan Industrial Partners, Inc. Hidemi Moue, CEO

Signing of Memorandum of Understanding for Divestiture of Imaging Business

Olympus Corporation (“Olympus”) and Japan Industrial Partners, Inc. (“JIP”) hereby announce that, today, the parties signed a memorandum of understanding to carveout Olympus’s Imaging business to a new company (“NewCo”) and subsequently transfer its shares to a fund managed, operated or otherwise handled by JIP (the “Transaction”).

After the due diligence and further discussions and negotiations, the parties are aiming to sign a legally- binding definitive agreement for the Transaction (the “Definitive Agreement”) by September 30, 2020. We will promptly make further announcement if any matters relating to the Transaction that needs further announcement occur.

  1. Background and Purpose of the Transaction
    Olympus’s Imaging business began with the manufacture and sale of a camera using the photographic lens Zuiko in 1936. Through innovative technology and unique product development capabilities, Olympus has developed and launched various products, aiming to contribute to make people’s lives more fulfilling. Those products include: Olympus Pen, the innovative half-sized camera; Zuiko Pearlcorder, the world’s first micro-cassette tape recorder; and Olympus OM-D series, the mirrorless interchangeable lens camera.

Olympus has implemented measures to cope with the extremely severe digital camera market, due to, amongst others, rapid market shrink caused by the evolution of smartphones; Olympus has improved the cost structure by restructuring the manufacturing bases and focusing on high-value-added interchangeable lenses, aiming to rectify the earning structure to those that may continue generating profit even as sales dwindles. Despite all such efforts, Olympus’s Imaging business recorded operating losses for 3 consecutive fiscal years up to the term ended in March 2020.

Under such circumstances, Olympus considers that, by carving-out the Imaging business and by operating the business with JIP, the Imaging business’s corporate structure may become more compact, efficient and agile and it is the most appropriate way to realize its self-sustainable and continuous growth and to bring values to the users of our products as well as our employees working in the Imaging business. Olympus therefore has decided to sign the memorandum of understanding for the Transaction.

1

June 24, 2020

JIP has strong track records in supporting strategic carve-outs that realize growth potential and encourage autonomous growth. By adding support from JIP, the NewCo, as the successor of reputable brands such as “OM-D” and “ZUIKO,” will utilize the innovative technology and unique product development capabilities which have been developed within Olympus, and will realize continuous growth of the business by bringing better products and services to the users and customers and by making itself a productive and rewarding work place for its employees.

  1. Imaging Business after the Transaction
    NewCo will succeed and maintain the research and development functions and manufacturing functions globally as reformed under the contemplated structuring reforms to continue to offer high-quality, highly reliable products; and also continue to provide supports to the imaging solution products that have been distributed by Olympus.
  2. Outline of the Transaction
    The specifics of the Transaction shall be decided in the Definitive Agreement after careful examination and consultation between the parties. The parties currently consider the outline of the Transaction shall be as follows.

The parties will proceed with the actions and procedures for Transactions in full compliance with applicable laws including consultation obligations and other requirements under local employment laws.

(1) Structure : (i) Olympus’s Imaging business will be transferred to the NewCo by way of company split or otherwise, and then, (ii) shares in the NewCo will be transferred to a new company to be established by JIP.

(2) Signing of                            : Scheduled to be signed by September 30, 2020
Definitive Agreement

(3) Closing                              : Olympus and JIP strive to close the Transaction by December 31, 2020.

  1. Structuring Reform
    Prior to the closing of the Transaction, Olympus plans to implement structuring reforms to the Imaging business aiming to change the business structure of Imaging business to be more profitable and sustainable. We are currently investigating costs and other impacts of the structuring reform. If any future event which requires disclosure arises, Olympus will announce it promptly.
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