Canon Posts Quarterly Results

(news & commentary)

Canon is typically the first to post their quarterly results, and things still don’t look so good for cameras. Indeed, Canon’s results suggest that something has got to give soon. What that might be, of course, is a topic for discussion, but let’s get to the results first.

Interchangeable lens camera sales were down 19% year to year, with 1.7m units sold (down from 2.1m last year). Compact camera sales were down 38% year to year, with 2.3m units sold. The portion of the Imaging Group’s business that is printers was down 13% year to year. Operating profit for the group—it’s still quite profitable—was down 9.4% year to year. 

The second quarter (April through June) was better in sales and profit than the first quarter (January through March), but a lot of that is seasonal. 

For the full year, Canon is still optimistically projecting a 9% decline in interchangeable lens camera sales and a 28% decline in compact camera sales and an increasing profit. Canon is now projecting to sell 7m interchangeable lens cameras for the year and 9.5m compact cameras. That’s almost a 10% lower forecast of units from their previous forecast, only three months ago. Plus even those lower numbers imply more sales for the second half of the year than the first.

Which brings us to the discussion of what has to give. Canon and Nikon have been through camera sales slumps before, most notably the wind down of the film SLR market from its peak. I expect them to try the same tactics as before, part of which means an increased emphasis on marketing, coupled with pricing flexibility. 

The market is saying “we no longer want to buy cameras, our smartphones work fine for much of our imaging and our existing cameras are good enough for the rest.”  Marketing has to attack that notion head on for the sales decline to be slowed. To reverse the decline requires substantively different product, as I’ve outlined for years now. 

Note that Canon still makes a reasonably healthy profit on cameras (at least the way they present their accounting): an expected 208b yen on an expected 1.4t yen in sales this fiscal year, or about 15%. That’s healthy, if accurate (corporate wide the operating profit is less than 10% once you throw in all the admin and other miscellaneous line items).

So what we have here is the proverbial cash cow. The only problem is that the cash cow isn’t growing, it appears to be on a very dramatic weight loss program and is getting smaller, becoming more the size of a calf than an adult cow. We’ve seen this pattern in other companies and industries. At some point you have to determine whether your cash cow is actually dying of a wasting disease, can be healed and/or at least stabilized, or needs to be replaced by another cow. Kodak missed all three of those things at one point or another in their demise. They had another cow ready but didn’t feed it, they failed to stabilize the older cow, and they never really understand the disease that was killing their cow in the first place. 

Canon is currently acting and saying that they think they can stabilize their ungulate. Let’s hope so, because as Canon goes so goes Nikon right behind them. Nikon announces their quarterly results while I’m on my annual month-long break, so I won’t be discussing them until September. But don’t expect a healthy, growing herd. I’ll bet that Nikon’s results will mimic Canon’s (as will everyone else’s). 

 

From City Slickers:

The cattle herd is finally moving.

Furillo: We’re doing great, guys! We’re driving them!

Berquist: Ah, that’s perfect! We’re lost but we’re making good time!

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