Nikon First Quarter Results 

It was expected to be a brutal quarter for many reasons, and that’s exactly what April through June was for Nikon this year. Compared to the previous year, Nikon Imaging's net sales were down 31% and operating income was down 30%. Last year in the first quarter Nikon sold 1.04m ILC cameras, while this year they sold 710k. Lenses went from 1.49m to 1.03m. Coolpix went from 1.53m to 840k. 

Reasons for the negative changes were listed as market shrinkage, exchange rates, and the earthquake. Apparently Nikon doesn’t count announcing products for expected shipment in the quarter and then not shipping them ;~). 

Cash is down, receivables are down, inventories are up. Not enough to be worried about, but the trend line needs correcting, and fast. 

The thing that saved Nikon from having a perfectly rotten quarter—Imaging down, Instruments losing money, the Medical business losing 33 cents on every dollar they took in—was the Precision semiconductor equipment group, which managed to sell a lot of small and medium-sized FPD lithography systems (27 compared to 8 last year).  This boosted sales for that smaller group dramatically, plus more than made up for the profit loss in Imaging. 

For the full year, Nikon has changed their forecast. The part that interests this site’s readers is the Imaging group, so let’s compare the previous year actuals against this year’s forecast:

  • Sales down from 520.4b yen to 423b yen, a 19% drop
  • Income down from 45.7b yen to 33b yen, a 28% drop
  • ILC cameras down from 4.04m units to 3.35m units, a 17% drop
  • Lenses down from 5.9m units to 4.9m units, a 17% drop
  • Coolpix down from 6.23m units to 3.35m units, a 46% drop

In essence, Nikon is becoming defacto a higher-end camera company whether they want to be or not. Coolpix is now collapsing at far faster than market rates. But even in ILCs things aren’t so rosy. Nikon’s traditional 33% (+/-2%) ILC market share is now forecast to slip to 26% for the year. The Coolpix market share is forecast to slip to 16%. 

More curious is that Canon is currently estimating 5.5m ILC units in their current year (offset from Nikon’s by one quarter), or a 42% market share. For those of you Sonyboys out there cheering Nikon’s market share drop, just remember there’s only 32% of the market left for you, Fujifilm, Olympus, Panasonic, and Ricoh/Pentax (why do I still have to write Ricoh/Pentax? Will they ever resolve the name infighting in their camera groups?). Plus those market shares are based upon projected shipments, which isn’t a safe bet this year. 

Still, we’re seeing a repeat of the 90’s, when Nikon relied upon Precision to sustain and grow the company, while Imaging slowly dropped to a low to mid-20’s market share. This is failure to execute an innovative transition of product in a mature market, the very thing I’ve been now harping about for eight years. To now reverse that declining market share trend it’s going to take something even more dramatic on Nikon’s part then before. 

Moreover, this Precision versus Imaging being the strong leg has perfectly followed top management: when a Precision employee becomes CEO, Precision does better, when an Imaging CEO becomes CEO Imaging does better. This can’t be coincidence. It’s a problematic upper management structure that pays more attention to what it knows best.

Keymission, DL, the D3400 and various Coolpix delays, the apparent Nikon 1 suicide, don’t speak to Nikon  doing anything dramatic in cameras soon, unfortunately. They’re unable to execute current product development well and on time, let alone do something new. Sure, the earthquake had an impact here, but it had as much impact on pretty much everyone else as it did on Nikon, so losing market share is not really due to the earthquake. Nor is it due to currency fluctuations. Nor is it due to market shrinkage. It’s due to Nikon Imaging’s own poor execution, period. Sadly, I don’t see anything on the horizon to change that. 

Don’t get me wrong. We’ll get D610, D750, D810, D5500, and D7200 replacements somewhere in the future pipeline, as expected. They likely will be very good products, as the cameras they build on are pretty good to start with. But realistically, if you already have one of those DSLRs, what do you need a new one for? One of the reasons for “market shrinkage” is that the products now are so competent that you don’t have to upgrade every cycle, maybe not even every other cycle. It’ll take something special to break that pattern. 

Let’s hope Nikon has something special up their sleeves. But as I look at them, they seem to be wearing short sleeved shirts. 

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