Olympus future in spotlight ahead of CES (update Friday)
December 16, 2011
Speculation is rife over the future of Olympus as photographers gear up for the Consumer Electronics Show in the United States.
In light of intense speculation about the future of the camera maker – as accounting cover-up revelations fuel concerns that parts of the business may be hived off – it seems timely to revisit Amateur Photographer (AP)’s interview with former CEO Michael Woodford.
Olympus man on a mission
At the time of the face-to-face interview, nearly a month ago, Woodford was the centre of media attention having, just weeks before, been sacked after questioning his former colleagues about suspicious multi-million-dollar transactions, originally brought to attention by a Japanese financial magazine called Facta.
Woodford’s actions set in motion multiple investigations into one of the biggest accounting scandals in Japanese history and he is this week advising politicians on the rules governing Japanese companies.
The former chief executive is also in Japan campaigning to be reinstated as CEO.
In the AP interview Woodford was asked specifically about how he would view the camera business if he made a return to the top job.
He spoke passionately about Olympus Pen cameras and the future of the company as he saw it.
During the hour-long meeting Woodford, then still a director, was frequently interrupted by calls from news media worldwide and was understood to be receiving police protection in the UK and Japan, where he was to visit a few days later for a boardroom showdown, en route to the FBI in New York.
Fired CEO spells out future
Woodford said he saw a huge potential for ‘high-end superzoom’ compact cameras, yet it seemed Olympus’s Pen-branded micro four thirds models held the key to the photo division, having provided a platform to ‘rebuild’.
However, Woodford – a big fan of the Olympus Pen E-P3 – voiced frustration that the company had only ?limited resources? to promote Pen in an ever-cutthroat market – a concern amplified by the ?weird and wonderful? acquisitions that included an outfit making face cream [one of the deals which formed a key part of the £1.1 billion, 13-year, accounting fraud].
?To me the product is everything. We’ve seen that with the Pen? to get back to 24, 25% [market share] in Japan ? the home of Canon and Nikon is quite remarkable.?
The damage done to the brand’s reputation by the widening scandal had left Woodford ‘depressed and saddened’, yet he insisted Olympus was not fatally wounded.
‘I wouldn’t say I would be prepared to go back and run it if I felt it was too late, would I?’, added Woodford who said his father was a photographer.
‘To me there’s nothing wrong with Olympus, except the most senior management, that’s the weakness.’
He stressed that the medical equipment and camera divisions share many ‘common components’.
‘The distribution channels are very limited so you don’t need a massive infrastructure. What you need to do is invest in the product, and also to some extent, the brand.
‘You would be a romantic and a fantasist if you felt the [camera business] was going to be really profitable ? But it could be a profitable business, utilising the infrastructure of, for example in the UK, KeyMed which is a brilliant company.?
Woodford conceded there are ‘too many players’ in camera manufacturing but that Pen gives him ?genuine hope? for the future, especially given that the E-P3, for example, holds a leading position in countries including Japan, Korea and Singapore.
?Olympus is probably in a better position than most, if the Pen is an illustration,’ he said.
No sell-off plan
Woodford joined Olympus?s UK medical equipment arm KeyMed in 1981 and worked his way up through the Essex-based company. He is keen to return as boss of the 92-year-old corporation.
However, there has been media speculation that Olympus might seek to sell off its camera business – retaining the much larger, more profitable, medical equipment arm.
Asked where this would leave the camera division, if shareholders reinstate him at the helm, Woodford replied: ‘The camera business is stronger than it’s been for several years but we have to see where Olympus’s future goes.
‘We have gone back into profit in the consumer business and I would keep it for the moment.
?If the business continues in its current form then ?consumer? is certainly not in the area I am saying we should cut.’
Woodford hinted that he would have felt differently had he been in charge three or four years ago.
Though unwilling to make any long-term predictions, he said that in future the camera side must be ‘super-fit’.
How scandal was exposed
Woodford was at Olympus’s European base in Hamburg, Germany on 27 July when he was alerted to the crisis, a week after a Japanese financial journal called Facta raised questions about exceptionally high fees paid to advisers in relation to companies Olympus had acquired.
Woodford asked a Japanese businessman he knows to translate the Facta magazine article and, soon after, a contact with knowledge of Olympus confirmed Woodford?s fears.
The ex-CEO had begun receiving emails from contacts warning him of the potential implications for the company.
Though the main focus was $687m in fees linked to ?unknown parties? in the Cayman Islands – in relation to Olympus?s takeover of British medical equipment maker Gyrus in 2008 – Woodford also questioned three ?Mickey Mouse? acquisitions that include a firm making ?microwave dishes?, in total involving funds exceeding $900m.
Woodford?s concerns prompted him to independently commission accountants PricewaterhouseCoopers to draw up a report into the suspicious dealings, a document now in the hands of investigators at the UK?s Serious Fraud Office (SFO).
‘The night I get to Japan I sent [the board] my report and a letter – then I’m dismissed. I had brought notice to the board in an evidential way. They wanted to close it down quickly, close me down?. Japanese companies hate anything public so what were they so scared of?’
Asked if he thought his fellow directors were naïve by sacking him in the knowledge he may go public, he replied: ‘I think they were desperately scared and thought they could perhaps manage it and weather it out.’
Woodford, who does not speak Japanese, received news he’d been fired, on 14 October, via a translator.
Reluctant to speculate about how Olympus executed the losses cover-up, the former CEO repeated called for ‘forensic accountants’ to act within weeks, if not days, to rescue the company from its ‘current totally dysfunctional state’.
An Olympus-commissioned inquiry subsequently confirmed Woodford’s assertions, leaving the firm with a huge hole in its balance sheet after the company’s accounts were corrected to reflect the dodgy deals.
Olympus president Shuichi Takayama yesterday suggested the firm may have to raise capital or form a strategic alliance with another company. All options are being considered, he said.
Though camera sales volume surged 15% in the six months to 30 September 2011, Olympus told reporters that it did not expect the camera division to make a profit for the full financial year to 31 March 2012.
For his part, however, Woodford is adamant that he wants Olympus to remain an independent entity.
So, this is far from the final chapter in a story that, at one stage, caused Olympus’s share price to plummet more than 70% and was being compared by its ex boss to a John Grisham thriller.
As the Briton fights to make a comeback as CEO, there is confusion over whether the entire Olympus board of directors will actually quit, as Takayama had hinted they would do.
Last night, Takayama appeared to reverse his earlier decision, according to reporters at a Tokyo press conference.
Meanwhile, Olympus continues to announce new products as its representatives gear up to join industry rivals at the Consumer Electronics Show (CES) in Las Vegas in early January. CES should have more of a photographic flavour this time around, as it combines with the Photo Marketing Association trade show for the first time.
As the fog of the Olympus crisis slowly lifts, and technology marches on regardless, one thing seems as clear as a top notch lens. As camera makers jostle for positive publicity at CES 2012, the future of Olympus, an historic camera brand with roots stretching back 92 years, will be on many photographers’ lips.
The full interview can be read HERE.
(Picture credit: C Cheesman)