Canon Inc. Q1 Profits Hit by Lower Camera and Printer Sales

The following report is from Reuters :

• Q1 operating profit falls 39 pct, more than expected
• Office equipment, compact digital camera sales slump
• Firm trying to diversify away from consumer cameras (Adds segment breakdown, context)

TOKYO, April 26, 2016 - Canon Inc. on Tuesday reported a steeper-than-expected fall in first-quarter operating profit on weaker demand for office equipment in emerging markets and slower global sales of compact digital cameras.

The world’s biggest maker of printers and cameras also cut its outlook for the full year ending December. For January-March, operating profit dropped 39 percent to 40.1 billion yen ($361.4 million), the company said. That missed the 67.74 billion yen average of five analyst estimates, according to Thomson Reuters data.

Canon said it now expects full-year operating profit of 300 billion yen, lower than a previous forecast of 360 billion yen. Quarterly operating profit from office equipment, its biggest segment, fell 38 percent from a year earlier while profit from imaging systems such as cameras fell 33 percent.
To reduce its reliance on cameras, Canon agreed to buy Toshiba Corp’s medical equipment unit for 665.5 billion yen last month. The deal followed the purchase last May of 85 percent of Swedish video surveillance firm Axis AB.

The company, which earns about 80 percent of revenue overseas, said the yen’s appreciation in the first quarter had a negative impact on earnings. For the rest of the year, it said it expects the U.S. dollar to trade at an average of 110 yen compared with a previous assumption of 120 yen.

Canon Japan Rethinks Its Pricing Strategy?

Canon announced the long awaited EOS-7D Mk II camera on September 15 with a list price of $1,799. As you can see from the pyramid above, the new camera is lumped into the section with the EOS-5D Mk III and EOS-6D. Both cameras will be getting an upgrade next year. The current list price of the 5D and 6D bodies are $3,399 and $1,899 respectively.

Last year, I wrote a post commenting on how Canon is pricing their higher end cameras too low by putting too many advanced features on them. Now that the EOS-7D Mk II has been introduced at a price point so close to the EOS-6D, there will be room for the Mk II version to be priced above $2,000 next year. The two cameras are fundamentally different and appeal to separate segments of photographers. To me, the EOS-6D is Canon's way of luring anyone who is interested in getting into full frame photography at a very low price. I doubt they are making much money on this model. My philosophy on photographic equipment has always been to go for value and not low price.

I define value as the best combination of performance, quality and price while a low price is usually achieved by providing the bare minimum quality and features. The next EOS-6D Mk II may go upmarket but still be priced comfortably below the EOS-5D Mk IV by about $1,500.