Red, White, and little Blue?
Update August 15, 2007 -- I've gone ahead and updated the tables at the right to the latest numbers (using Nikon's July 2007 estimates for fiscal 2008). Two things stand out in the current numbers: Nikon appears to think that they have new Coolpix models on the way that will increase their sales by >20%, and lens sales are predicted to be grow considerably, as well. This would be a "firing on all cylinders" type of scenario if Nikon manages to live up to it, as DSLR sales continue to increase significantly, as well. Note, however, that while unit volumes are all projected to be up by 20% or more, sales and profit numbers are projected to show single digit gains.
Update May 16, 2005 -- Nikon's full year results have come in and we now can get rid of the "e" in some of our charts (see right).
Nov 20, 2004--Nikon's
first-half 2005 report was encouraging on some fronts, not so
great on others. [A reminder: Nikon's fiscal year, which is what
I'm referring to when I say 2005, ends in April 2005.]
stepper business is still slowly improving, though this means
it is hoovering near the breakeven
(the part of Nikon that readers of this site care about) is
still decently profitable.
Nevertheless, if you look at the camera sales predictions,
there are signs of weakness. Essentially Nikon is predicting
margins and market share will continue to slide in the consumer
camera realm (see right hand column for some exact numbers).
Overall, the estimated camera sales have been lowered by 10 billion
yen (though the income is still predicted to be about the same--what
Coolpix margins are taking away, the DSLR margins are grabbing
back). Note that Nikon's predicting sales based upon a yen
value of 107 to the dollar for the remainder of their fiscal
I think is a bit high--I expect the dollar to fall further than
that, as the Bush administration seems to be totally oblvious
to the spiraling impact that continued neglect will create. The
thing in the mid-year estimates from Nikon is
this: they seem to be saying the Coolpix growth has stalled
or perhaps even reversed and that DSLRs are where they will get
future income. For example, estimated lens sales are up 50% for
years of flat to modest growth). Overall digital camera sales
are estimated to be up only 10-20% in fiscal 2006 according
to Nikon, and since we know that their highest growth in digital
camera sales is in
means that Coolpix sales may actually be decreasing in unit
volume (note that digital camera sales are predicted to drop
second half of fiscal 2005 while film SLR sales are predicted
to rise [F6, most likely]). This could be an intentional thing,
as Nikon has stated repeatedly in the
year that consumer
very fast. Or it could be simply an indication that the Coolpix
models just aren't holding their own in the market. I'd tend
to think it's a combination of the two, actually, as Nikon
does indeed seem to be iterating somewhat slower than before
and their low-end Coolpix models tend to be a bit me-too because
of that (erosion).
May 26, 2004--Nikon
is still underperforming (see last year's report, below), though
things are looking much better with the uptick
in the semiconductor market. Bottom line? Sales up 8%, net income
now 2.41 billion yen after taxes (as opposed to last year's 8.14
billion yen loss). Better still, Nikon is forecasting a 40% rise
and an increase to 19 billion yen in income for the coming year.
American customers will not be surprised to learn that the US
was the region that provided the most profit to Nikon (Japan
showed a loss). Imaging product sales went from 270 billion yen
to 283 billion yen, a dissappointing increase (more on that in
a bit). Fiscal 2005 (ends March 2005) is expected to bring in
369 billion yen by comparison, though operating income is expected
to drop. R&D expense for imaging was 10.4 billion yen in 2004.
big problem for Nikon in fiscal 2004 was that they simply weren't
able to produce all the product they predicted they would. Twice
during the year Nikon reduced their digital camera unit forecast,
mostly due to supply and manufacturing problems with the Coolpix
line and lenses. While they've been scrambling to add capacity
and fix supply issues, this problem has lingered for quite some
believe they've fixed it when we see unit shipment evidence.
Other camera companies have had similar problems (Fujifilm and
Olympus come to mind), but others haven't, and they're the ones
gaining market share. Still, look at the numbers in the right
column: Nikon is a digital camera company, period. Film camera
sales completely collapsed in a two year period (75% decrease).
Meanwhile, several of Nikon's digital models are doing quite
series of articles over the last month in both the Japanese press
(e.g., Nikkei Report) and the US (e.g., The New York
Times) have all noted the same thing: in a year where all the
digital camera companies in Japan have posted outstanding sales
and earnings growth, Nikon stands out as the lone exception.
May 9th Nikon announced that it had a net loss for fiscal 2002 of
8.14 billion yen and would skip its annual dividend for the first
time in 42 years (that's the "red"). Yet the camera division's
profit was up 72% on a 130% increase in digital camera unit volume
(that's the "white," as in white hot). The problem is
Nikon's stepper business, started in 1980, which is dependent upon
the health of semiconductor manufacturers (who are all a little
"blue" in the current tech slump).
Nikon's stepper business has big customers, such as Intel and Sony,
it closely follows tech cycles. And it didn't help that Nikon didn't
seem to catch the shift in microchip manufacturing to South Korea
and Taiwan in recent years; Nikon managed to lose its top spot in
worldwide stepper sales in the past year. Bottom line: a projected
loss of 22 billion yen in the stepper business for fiscal 2003.
I guess you could say that's below the bottom line.
Report pointed out two significant issues, both of which are
of interest to readers of this site:
spent about 18 billion yen in camera R&D in 2002. But
that's only about a third of the company's product R&D
expenditures, despite the fact that digital cameras are the
and most profitable of Nikon's businesses. While the total amount
represents a significant chunk of change (well, it would
it also means that we're unlikely to see Nikon throw dozens of
CCD-based cameras against the inkjet paper and see what sticks.
What comes next needs to be competitive, so don't expect the
world's first digital slot-scan panorama camera or any other
product. It probably also means that D-TTL won't get fixed in
the near future, either. [Seems slightly prophetic. The Coolpix
line changed slowly, the D70 and D2h are the only new DSLRs,
and they took longer to get to market than some expected.]
uses Sanyo to manufacture the Coolpix cameras rather than doing
it directly. This means that they share some of the profits with
another company while a company like Canon doesn't. What isn't
noted by Nikkei Report (or in any of the articles) is
that Nikon has been doing this for some time. I seem to remember
a circa 1991 Nikon video camera that was made by Sanyo, too. And
frankly, Nikon's not the only one doing this. If you think your
Kodak camera is made by Kodak, or your Leica digital camera is
made by Leica, well, think again. Sanyo, Kyocera, and a handful
of other companies produce a lot more of the consumer cameras
you see than you might guess. Yes, Canon is different and probably
retains more dollars per consumer camera than Nikon (one estimate
18% of the price versus 10%). But that hasn't helped them unseat
the leader in that market, either (Sony).
should Nikon users and loyalists panic? Not really. Though it's
clear that a great portion of Nikon's energy and attention is on
the stepper business, Nikon's camera business is healthy and growing.
While many of the reports speculate widely about Nikon's mediocre
and mid-pack showing in consumer digital cameras, Nikon has never
really been a strong contender in the low-price, high-quantity camera
market. (Quick, how many Nikon 35mm point and shoot cameras do you
see?) I fully expect to see a D1 replacement within the next few
months, and if it's as competitive as the current models have been,
the camera group will continue to be happy and growing. Besides,
Nikon's current camera business problem seems to be delivering enough
of what they've already announced (even D100's don't seem to stay
in stock at most dealers; I was at the primary Nikon dealer in a
major market recently, and they were telling me they get three D100's
at a time, and they're all always sold before they come in).
if the semiconductor business ever picks up again, well, Nikon should
be back paying dividends again. Perhaps by then someone will actually
be able to tell me what my tax on them will be ;~)