The financial scandal rocking Olympus is one that the company may not survive. The company’s stock price plunged another 17% today, and the Tokyo Stock Exchange has informed the company that it will be delisted if it doesn’t meet a December 14th deadline for reporting earnings. The New York Times has a great piece on how Olympus got itself into this mess:
In June 1998, a disturbing rumor tore through trading floors in Tokyo: Olympus had suffered colossal losses on derivatives trading, punching a large hole in its balance sheet. The company’s shares spiraled down 11 percent in three days.
But Olympus categorically denied the rumor and went on to post record profits. All was well in the house of Olympus, the newly installed president, Tsuyoshi Kikukawa, assured investors.
Turns out the losses were in fact real. They were so colossal, however, that booking all of them could have pushed the company into bankruptcy. The management then decided to fudge their numbers in an effort to save the company.
Corporate Japan Rocked by Scandal at Olympus (via TOP)
Olympus admitted today that its top executives used dubious acquisitions to sweep 20 years of massive losses under the carpet. At a press conference in Tokyo, new President Shuichi Takayama revealed that the 2008 acquisitions at the center of the company’s ongoing scandal were used to cover-up failed securities investments dating back to the early 1990s. Michael Woodford, the ex-CEO who brought the acquisitions to light, says that further inquiry is needed and that the company leadership needs to be purged:
This is a very big day. The big questions now are: who helped us – which outside companies? And what monies have they received? [...] The position of the board and non-execs is untenable now.
The news immediately crushed Olympus’ stock, causing it to drop 29% in one day. The company has lost 70% of its market value since the scandal began in mid-October and is now facing major consequences — including the possibility of getting delisted from the Tokyo Stock Exchange.
Image credit: Chalk Farm Banksy by grahamc99
After arriving late to the digital photography party, Kodak took another step away from the market yesterday by selling off its sensor business to CA-based firm Platinum Equity. The sale of Kodak Image Sensor Solutions (KISS) — which includes the company’s 263,000 square foot facility in Rochester — will hopefully give Kodak the boost of cash it needs to avoid bankruptcy and turn into a healthy business. Kodak sensors are found in a number of popular cameras, including the Leica M9 and S2.
The company is also looking into selling a chunk of its patents to raise more cash, which will help it in its current efforts to transform into a printer and ink company.
(via Business Wire via 1001 Noisy Cameras)
Kodak’s fall from grace is an interesting case study that modern day companies can learn from. Even though the world’s first digital camera was invented by one of its engineers, the company was unwilling to cannibalize its film business that, at the time, was making money hand over fist. By the time digital cameras started catching on, Kodak had missed the boat.
Jake Adelstein at the Japanese Subculture Research Center has written up an interesting article regarding the ongoing Olympus scandal, focusing on the organized crime allegations that have been brought against the company:
In year 2008, something happened at Olympus that turned the company from an entity focussed on seven major business areas, into a company completely out of focus, blurred by a total of seventeen business areas, to include real estate, investments, consulting, waste disposal, labor dispatch, and running travel agencies. Igari Toshiro, former prosecutor turned anti-yakuza crusader, who was Japan’s greatest expert on white-collar organized crime aka the keizai yakuza (経済ヤクザ）and many veteran organized crime detectives have stated that one of the first signs that a company has been infiltrated by anti-social forces is a sudden and totally new change in company direction–especially into areas like waste disposal, labor dispatch (temporary staffing), and real estate—all areas where anti-social forces have carved out a large niche for themselves.
Just days after being fired, former Chairman Michael Woodford was quoted as saying, “There were $800 million in payments to buy companies making face cream and Tupperware. What the hell were we doing paying $800 million for these companies?”
OLYMPUS: Bringing It Into Focus [Japan Subculture Research Center]
Image credit: OLYMPUS PEN E-P1 by sinkdd
Photographer Zack Arias has an interesting piece on why he doesn’t think photographers should feel threatened by others who offer their services for absurdly low prices:
Think of the brides out there who don’t have a budget but want some photos of their weddings. Maybe there are young couples getting married who don’t have the parents to pay for a big event or they don’t want to start their young family in debt but they would like someone to come take some pictures. Are you saying that if they can’t afford a $3,000+ photographer then they don’t deserve photos? Are you saying that if they can’t afford a Mercedes then they shouldn’t be allowed to drive? Shame on you. Not everyone can afford pro level prices. That doesn’t mean they can’t have some level of photographic services available to them.
[...] I’ve laid this all out to make the point that cheap photography has its place. It has its place for clients who can’t afford much and it has its place for photographers trying to build something from nothing. It’s part of becoming a full time working photographer in an age when so many want to become a photographer.
Cheap Photographers Only Kill Themselves, Not The Industry [Zack Arias]
Leica Camera is now nearly half American-owned: the company announced yesterday that it has agreed to sell a 44% minority stake to US-based private equity firm Blackstone Group. Leica Chairman Andreas Kaufmann says the purpose is international expansion:
[...] we are concentrating on further developing the brand and its products as well as on entering new markets in Asia, Latin America and the Middle East
Leica has turned things around quite a bit in the past decade. Back in 2004, Kaufmann purchased 95% of the company for around $85 million. The company reported record sales last year, and although the financial details of yesterdays deal weren’t announced, the Wall Street Journal is reporting that the 44% came at a price of $179 million. This would value the company at ~$407 million, meaning the company’s value has grown by a whopping 450% over the past 7-8 years!
(via WSJ via Leica Rumors)
Last Friday, we reported that Olympus had fired CEO Michael Woodford, claiming that he clashed with the company’s 92-year-old management style. Woodford is now coming out with different story: he believes that he was dismissed after raising questions about $1+ billion in payments the company made in acquisitions between 2006 and 2008. The Financial Times writes,
Mr Woodford [...] had been pressing other directors since July to explain payments related to the 2008 purchase of Gyrus [...]
Olympus’ own auditors had privately identified problems with the Gyrus transaction, the documents show. KPMG, Olympus’ auditor until 2009, said in an internal report dated March that year: “In our opinion proper accounting records have not been maintained.”
Olympus replaced KPMG as its auditor when its contract ended two months later.
Mr Woodford stressed that he had seen no evidence that Olympus executives benefited improperly from the acquisitions. But he said large amounts of money seemed to have “disappeared” into the hands of poorly vetted outside financial advisers and investment vehicles.
According to BusinessWeek, Woodford has met with the U.K. Serious Fraud Office to request that they investigate the acquisition. Olympus is also considering suing Woodford for leaking internal information to the press.
Ex-Olympus chief questioned payments (via 4/3 Rumors)
Have an idea for a photo product and an entrepreneurial itch? PDN published an article this past week with three stories of people who successfully turned their ideas into products (and businesses). One of them is the story of Gary Fong and his Lightsphere:
Gary Fong, the former wedding photographer-turned-entrepreneur whose name has become synonymous with lighting accessories, says he got the idea to make his first photographic product, the Lightsphere, while flipping through an in-flight magazine. “There was an ad that said something like, ‘We make plastic parts for your ideas.’” It started him thinking about what he would like to make. What he wanted, he thought, was a large light diffuser, modeled on a lampshade. “Until then, diffusers were tiny. They sat on top of your flash and they didn’t do anything to the shape of the light. All they did was block the light coming through your flash.” He noticed that when he photographed indoors, light filtered through lampshades—which create a hot spot on the ceiling while diffusing the light on faces—produced pretty skin tones. “I thought, okay, I’ll make a big lampshade for electronic flash.”
Fong’s advice to fellow inventors? “All you need is the customers. It’s got to be a product that customers will buy. If they buy some, you know grandma will be packing boxes for you. If they buy waves of them, you’ll have grandma supervising some temps who pack the boxes until you find a distribution company.”
How Inventors Turn Their Ideas Into Photo Products [PDN]
Image credit: April Seattle Flickr meetup by Paul David Gibson
Olympus fired CEO and President Michael Woodford today, causing the company’s stock price to take a 17% dive. The 51-year-old Briton was accused by the board of ignoring the management culture that the firm has had in place for 92 years. Chairman Tsuyoshi Kikukawa (who replaces Woodford) says,
We hoped that he could do things that would be difficult for a Japanese executive to do, but he was not able to understand that we needed to reflect the management style we have built up since the company was established 92 years ago, as well as Japanese culture.
The “difficult things” included ambitious cost-cutting plans, which proved to be successful in the company’s European division. Woodford had a habit of ignoring the management structure of the company by giving direct orders to employees rather than the leadership of the different units. While Olympus is known in the consumer electronics industry for its digital cameras, it’s medical equipment that keeps the company afloat — the Olympus camera division lost 15 billion yen (~$195 million) in the year to March 2011.
Olympus fires British CEO, a self-confessed loud-mouth [Reuters]