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Thursday, August 7, 2014

Canon Cuts Forecast As Camera Demand Slows

Canon, the world’s largest camera maker, lowered its full-year sales forecast as demand slows amid a consumer shift to smartphones for taking pictures. Late last year, I reported there may be a shakeout coming among mid-tier camera makers due to the challenge of smartphones.

The current dilemma Canon is facing has a lot to do with their sales practices. They launch too many old and uninteresting low end cameras with new, slick marketing programs. On top of that, their high end cameras are priced too 'cheap' and the price-to-performance differential between prosumer and professional models are dropping, tempting users to buy value, instead of performance.

The following is an excerpt from Bloomberg News on Canon's forecast of their business :

Sales are projected to be 3.78 trillion yen ($37 billion) for the current fiscal year, a 2.1 percent cut from the previous forecast. The Tokyo-based company maintained earlier projections for operating profit of 365 billion yen and net income of 240 billion yen.

Smartphones packed with advanced sensors and lenses are winning customers and cutting demand for cheaper compact cameras. Canon, which posted better-than-expected quarterly profit, is counting on sales of office equipment, including a partnership with Hewlett-Packard Co., as it automates more production to reduce costs and revive earnings.

“Demand for compact cameras declined sharply because of smartphones,” Makoto Kikuchi, chief executive officer at Myojo Asset Management Co. in Tokyo, said by phone. “Canon was too aggressive with their SLR sales forecast. People who want them have already bought them.”

Canon rose 0.8 percent to 3,414 yen at the close in Tokyo trading, before the earnings announcement. The stock has added 2.5 percent this year after three straight annual declines.

Net income in the second quarter rose to 80.8 billion yen, beating the 62.4 billion yen average of six analyst estimates compiled by Bloomberg. Operating profit was 110.5 billion yen.

“The forecast cut is a reflection of slower than expected economic recovery,” Chief Financial Officer Toshizo Tanaka said today. “An increase in sales of high-end color copiers and printers has pushed up profitability.”

Slumping Demand

Canon sold 2.3 million compact cameras in the second quarter, a 36 percent decrease from a year earlier, according to Tanaka. Sales of the company’s single-lens reflex cameras dropped to 1.7 million from 2.1 million.

Industrywide digital camera shipments declined about 35 percent from a year earlier in the first five months of 2014, according to the Camera & Imaging Products Association.

“The company needs to find a new product for growth,” Hisashi Moriyama, an analyst at JPMorgan Chase & Co. in Tokyo, said by phone before the earnings were announced. “Single-lens reflex cameras didn’t sell as well as expected.”

Canon forecast an exchange rate of $1 for 100 yen and 1 euro for 135 yen for the third quarter.

Canon cut its annual sales forecast for compact digital cameras to 9.5 million units from the previous target of 10.5 million units. The SLR camera sales projection was pared to 7 million units, from an earlier 7.6 million units.

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