Despite constant rumors and denials that Olympus’ imaging business was in trouble, those of us who have lived through such things before knew that something was in the air. Though we did not want to believe it, we knew that “there’s no smoke without fire.” We got an inkling that something was not right back in May when Olympus exited the camera business in South Korea. These kinds of persistent rumors are always a sign that there is trouble brewing in paradise and that it was just a matter of time — and the right partner. Indeed, following operating losses for 3 consecutive fiscal years, Olympus has had enough of its imaging business and is ready to basically divest itself of it.
Apparently, Olympus has found the right partner in JIP (Japan Industrial Partners, Inc.), a specialist shop in restructuring companies in trouble. The Definitive Agreement is to be signed by September 30, 2020 and the transaction to be closed by December 31, 2020. Come next year 2021, the ZUIKO and OM-D brand names will not be under the Olympus umbrella anymore.
Despite reassurances that the ZUIKO and OM-D products will continue, JIP is not an imaging company but is a financial company that is only interested in making a profit from the purchase. The only hope for the continuing support and future growth of these two brands is if an imaging company purchases them whole from JIP and integrates them into its product line, somewhat like what Sony did with Minolta.(Imagine if Leica had a partnership with Olympus, not Panasonic. But wait, they are both 4/3 companies, so Leica could still make a strategic acquisition, but nay, Leica’s mirrorless models are APS-C based.)
Read more of my thoughts after the fold.
June 24, 2020
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 carve out 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 interchangeablelenses, 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.
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.
2. 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.
3. Outline of the Transaction
The specifics of the Transaction shall be decided in the Definitive Agreement after careful examinationand 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 Definitive Agreement : Scheduled to be signed by September 30, 2020
(3) Closing: Olympus and JIP strive to close the Transaction by December 31, 2020.
4. 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.
Editor’s note
OK, so here are my thoughts on this sale.
What Does It Mean to Current Olympus Camera Owners?
1. Olympus will continue to manufacture, sell and support its current cameras and lenses under the Olympus brand until the final sale to JIP takes effect December 31, 2020. All the reassurances you read and hear is only about this. There are no promises beyond that date.
Read Olympus’ Statement to our communities regarding today’s corporate disclosure
2. After December 31, 2020, if JIP (or another third-party) decides to continue manufacturing ZUIKO lenses and OM-D camera bodies, they can use the ZUIKO and OM-D brands, but not the OLYMPUS brand. So, let’s say JIP succeeds in selling or leasing the ZUIKO brand to Sigma and the latter would then label some of its MFT lenses as ZUIKO lenses, which is a best scenario, meaning you will continue to get great lenses for your Olympus MFT mirrorless camera.
3. JIP will most probably carve out the Imaging Business assets into separate pieces (image stabilization technology, weather-proof technology, imaging firmware, lenses, MFT, etc.) and sell the pieces to the highest bidders.
Don’t count on Panasonic (Olympus’ partner in the Micro Four Thirds System) to purchase them because they already have many of the same assets, and it is no secret that their imaging business, and all other camera manufacturers’imaging businesses, are also facing financial difficulties.
4. The Olympus Imaging Business sale may well signal the eventual demise of the Micro Four Thirds (MFT) system as a viable imaging option for mirrorless cameras. The other main partner in the MFT consortium is Panasonic, and the latter has itself already moved on to full-frame cameras and is more or less paying only lip service to MFT (though both Olympus and Panasonic already have “new” products in manufacture and will introduce one or two updates to their respective line-up).
That would be sad because MFT has introduced smaller and lighter lenses to a whole generation of photographers, enthusiast and pros alike, and without that competition from Olympus (the current MFT torch bearer), cameras and lenses will start getting bigger and heavier again.
The MFT mount may continue to be used by other third-party camera and webcam manufacturers, but its future is currently in jeopardy.
5. What will smart professional photographers who have selected the Olympus OM-D E-M1 and E-M1X as their system of choice do now? Run! Probably back into the arms of a (hopefully) safer company, like Nikon and Canon. To which one? They will wait it out and see what these two 500-pound guerillas introduce as their flagship full-frame mirrorless cameras before settling on a system.
There must be a feeling of betrayal among the Olympus camera and lens designers and engineers who have worked so hard and so long to bring Yoshihisa Maitani‘s dream into the digital world.
Professional photographers who have selected the Olympus system can also understandably be feeling upset for being left high and dry by the company (especially when the company kept denying reports of a sale, and Olympus Visionaries believed that message and kept reassuring everyone about it).
Some Olympus Visionaries must also be quite upset, though with their contract ending in December, they are still contractually obligated to push whatever message Olympus wants them to get out, viz. Calm the waters. No folks, they cannot really tell us what’s on their mind right now. Wait after December. We do them all a great service by not pestering them with telling us the truth because they can’t and don’t want to lie to their loyal fans.
So they are all busy making videos trying to reassure us about the viability of the OM-D brand going forward, but as anyone who has gone through a number of business restructuring will tell you, it’s all marketing smokescreen to prevent panic and allow current inventory to be sold off at regular prices. You can play on semantics all you want, the truth of the matter is that the Imaging Business is as good as sold off to a financial restructuring company which does not have the expertise and qualified staff who knows anything about designing, developing, manufacturing, and properly supporting cameras. And no, if Olympus cannot make money selling these great cameras and lenses with a loyal following, JIP cannot either.
6. What about non-professional photographers? The Olympus PEN and OM-D mirrorless cameras are great cameras and will continue to shoot great pictures, so there’s really no need to sell them or switch to another brand. And, if you need to get different lenses to use for specific purposes, get the lenses now while they are still available. These are digital cameras, so as long as they keep working, you will continue to be able to happily use them for a very Very VERY long time.
As I said, the E-M1 III and E-M1X are great cameras, so wait a few months (perhaps the many end-of-year sales) and you may get a fire sale. I wouldn’t mind getting my hands on one and be the proud owner of a E-M1 III with a couple of lenses (M.Zuiko ED 60mm f2.8 Macro, M.Zuiko ED 300mm f4.0 IS PRO, M.Zuiko Digital 1.4x Teleconverter MC-14) at the right sales price.
Who’s Next On the Chopping Block?
The bad news may not end here. Don’t be surprised if this is but the first of a number of other camera manufacturers that will exit the imaging business altogether in 2021 and beyond. This is bad news for consumers, but all good news for Nikon and Canon, two companies that came late to the mirrorless party, but may well be the last two that remain standing when all the dust clears. Why? Because these two companies have very deep pockets and are very much entrenched into the imaging business.
What about Sony? Back on April 1, 2020, Sony spinned off its businesses that made up its Electronics Products and Solutions segment (which included Imaging Products & Solutions) into a new separate holding company called Sony Electronics Corporation. It is also under tremendous financial pressure (especially from one very persistent activist investor) to show profits and a good ROI — or sell its imaging business. Sounds familiar? I know it sounds far-fetched that Sony will exit the camera business especially that its A7 series mirrorless cameras are doing so well right now. But, with some companies, all it takes is a couple of losses to seal their fate.
Sony is also worried about competing with Nikon’s and Canon’s new full-frame mirrorless cameras. After having the full-frame mirrorless market all to itself for a number of years, it is surprised (we all are) that Nikon and Canon have succeeded to catch up so fast. Sony is delaying the launch of its A7S III to mid-end-July to await the introduction of the Canon EOS R5 in early July and ensure that the A7S III can match the R5’s specs (probably through firmware update promises) and price. The EOS R5 is not even supposed to be Canon’s flagship full-frame mirrorless camera. Sony will probably survive for now, but the coming flagship full-frame mirrroless offerings from both Nikon and Canon will determine Sony’s future standing among professional photographers.
The Olympus PEN and OM-D MFT system cameras are going to enter into legend, and it is with profound sadness that we witness their demise.
If you too mourn the passing of a great camera brand, please quietly join us, wherever you are, as we now observe 80 seconds (4/3 of 1 minute) of silence.