Olympus prepares for layoffs, as it goes back to basics

In the middle of last week, Japan's Kyodo News agency offered two reports suggesting that Panasonic Corp. might be about to make a significant investment in embattled Olympus Corp., and that the latter would release a mid-term business plan at the end of the week.

Shortly after that report, Panasonic officially denied the news, telling Reuters that it was not the source of the information, and had no plans to invest in Olympus. Although it appears that Kyodo may have called that story wrong, today we note that Olympus did indeed finish out the week with a lengthy fifty-page "Announcement of Medium-Term Vision".

The document outlines Olympus' plan for the next five fiscal years, taking it thru March 2017. Adopting the slogan "Back to Basics", the company says it intends to rebuild itself and regain stakeholder credibility by returning to the values on which it says the company was originally founded. There are  three core values Olympus identifies as key to its past and future. The company states dual goals of offering products and solutions that contribute to society and its development, and of striving to make its products the "world's first and best". In doing so, it suggests its third goal is to focus on its customers and their needs.

Kicking off the process, Olympus says it will reduce its emphasis on sales, review its cost structures, and redefine itself around three core businesses: Medical, Life Science and Industrial, and Imaging. The latter, of course, will be key for our readers.

Olympus Imaging will increase its emphasis on interchangeable-lens cameras, especially mirrorless models such as the popular Olympus E-P3. Photo copyright © 2011, Imaging Resource. All rights reserved.

For the imaging business, Olympus is aggressively aiming for profitability by the end of the current fiscal year. To achieve that goal, it predicts layoffs made to reduce its Selling, General & Administrative (SG&A) expenses, and suggests that it will restructure its manufacturing and adjust its advertising expenditure to get the best bang for the buck. It will also reallocate management resources as it reviews its product lineup, attempting to refocus on mirrorless and high-end compact cameras. Additionally, production lead (supply) times will be shortened.

Past Olympus imaging products, says the company, have lacked differentiating technologies versus competitors. Future products will emphasise new technologies such as the FAST-branded autofocus system that debuted in the E-P3, and the five-axis image stabilizer from the OM-D, as well as so-far unannounced tech. In compacts, Olympus will emphasize Zuiko-branded lenses, FAST-branded AF, bright apertures, and more. (The company hints at a "next-generation flagship model" on the drawing board, but doesn't provide any specifics.)

Olympus calls out the TG-1's f/2.0 max. aperture at wide angle as the kind of feature it intends to emphasise in future high-end compacts. Photo provided by Olympus.

Worldwide, Olympus predicts layoffs of around 7% of its total workforce within the next two years, a figure that hasn't been broken down by business group. We'd note, though, that while the company doesn't specifically state a goal for SG&A ratio improvements in its medical business, where it is calling for an expansion of its presence, it does call for a two-point SG&A improvement in the Life Science and Industrial business, and an eight-point improvement in Olympus Imaging. That suggests the bulk of the layoffs may come from its imaging division. In this area, it says that it plans to optimize the number of employees both in Japan and overseas, and to introduce new manufacturing technologies to improve productivity at its factory in Shenzhen, which was founded in 1991.

Factory closures and consolidations will apparently include Olympus Optical Technology Philippines, Inc. (microscope manufacture) which will be closing this year, and Nagano Olympus Co., Ltd. (interchangeable lens manufacture, as well as industrial video scopes, endoscopes, etc.), which will be consolidated from its current four locations to just one. Olympus will also revisit its procurement procedures and expand bulk purchasing of indirect materials (small items that are vital to production, but whose costs are typically hard to trace as they make up only a very small portion of the total product cost.)

Inexpensive cameras like the VG-150 may be good for boosting sales numbers, but with razor-thin margins and almost no differentiation, Olympus will be making fewer of them. Photo provided by Olympus.

Olympus has now greatly dialed back the sales targets for Imaging that were set back in 2010, now calling for more modest growth in terms of net sales over the next few years. Overall unit sales are expected to fall over the same period. Low-end compact sales are set for a 50% drop, as the company  refocuses on high-end compacts and mirrorless / SLR models. In these areas, Olympus is hoping for 70% growth in high-end compacts, and a whopping 180% growth in interchangeable-lens cameras by March 2017.

Much, much more detail can be found in Olympus' Announcement of Medium Term Vision, a PDF document on the company's global website.

The biggest growth is expected in mirrorless models, where Olympus will differentiate itself with technologies such as its FAST-branded AF and five-axis stabilization. Photo copyright © 2012, Imaging Resource. All rights reserved.