Olympus Divestment Next Steps and Reflections

On September 30th 2020 the announced deal between Olympus corporation and Japanese Industrial Partners has been signed. Despite all sort of hysteria that is out there on the internet the deal structure is quite simple and there is good information released by Olympus Global on this link.

The Birth of OM Digital Solutions Corporation

The data provided tells us that the current head of the camera business will transfer to the new company that will be headquartered in Tokyo. OM stands for Olympus Maitani however the word Olympus does not feature in clear in the company name perhaps because Olympus corporation did not want to have any ambiguity or misunderstanding going forward on who is Olympus.

So the first indication is that Olympus as camera brand effectively ends when the deal completes on 31st December 2020. What continues is the legacy of Yoshihisa Maitani who originally invented the OM system.

What is included in the deal

This is the official text in the news release.

The agreement applies to Olympus’ global Imaging business, which includes all R&D and manufacturing facilities currently dedicated to its Imaging business. The New Imaging Company will continue to provide high-quality, highly reliable products. Built on a solid foundation, including the Zuiko and OM brands, which are grounded in optics and digital imaging technologies cultivated by Olympus over many years, the New Imaging Company will be appropriately positioned to further pursue new developments. Head of sales and marketing, R&D and designing departments for imaging products will be relocated to the headquarters of the New Imaging Company in Hachioji, Tokyo. Production will continue at the location in Dong Nai province, Vietnam, where imaging products are currently manufactured. The New Imaging Company will continue to provide customer support for the imaging products which have been manufactured and sold by Olympus. Following the transfer of the Imaging business, Olympus will concentrate on Medical and Scientific Solutions, in our ongoing efforts toward making people’s lives healthier, safer and more fulfilling.

So what does this mean? Today Olympus operates as a single company and the imaging business is included in it so they needed to work out what exactly they were selling. From that list this includes:
• The Zuiko and OM (Olympus Maitani) brands
• The R&D department
• The Sales and Marketing Department
• The factory in Vietnam
And Olympus will focus on the medical and scientific business. The new OMD company will take on the after sales responsibility and warranty usually associated with provisions for repairs and returns.

What is NOT included in the deal

What is not included in the transfer is usually anything not specifically mentioned as included so a few considerations here expressing my view on the deal.

The factory in Nagano, Japan is not transferring but according to JIP news release will become a supplier to the new company. This is good for JIP as the factory in Vietnam is less than 3 years old and is in a market where workforce arrangements are more flexible than Japan. The Japanese factory that makes some components for Vietnam and in some cases full lenses will remain as supplier. Olympus also uses Sigma designs for some lenses like the 75mm 1:1.8 and the new 100-400mm 5-6.3 this will continue with OMD.

The Olympus Supply Chain is currently shared with the medical division there are a number of regional and local warehouse that will remain with Olympus together with any stock that is in there. All stock at customers (distributors or resellers) remains the property of those third parties. This is an important implication because it effectively means that OMD starts at zero stock and all the inventory sitting in those warehouses are Olympus corporation problem to clear, we have already seen aggressive promotions on OMD EM1MKII with a free 1.2 Pro prime lens. I bought one of those units and it was manufactured in February 2019 so clearly Olympus corporation distribution network is sitting on years of old stock.

The Olympus commercial network also remains with the seller and this means those entities will continue to trade in the respective markets until such time OMD decides to build their network, they may even decide to use distributors and focus on manufacturing and continue to use Olympus corporation or anyone else as they see fit, what is clear is that OMD is a manufacturing company not distribution. It will remain to be seen how the after sales services will be performed however this could simply mean customers get a replacement product or goods are sent all the way back to Vietnam for fixing or they establish 3rd party service centre to deal with this issue. Panasonic currently does that.

Future Direction of OMD

JIP has mentioned that they will focus more on video and on business customers this is good news as MFT strength really is in those two sectors. Panasonic has exploited that success while Olympus was only sticking to photos and suffering more the smartphone competition. We have seen an announcement that the newer OMD EM1 MKIII E1X will work in ProRes RAW with the Atomos Ninja a first step to get in that territory. Security is a big topic in MFT too as the back illuminated sensor in the GH5s is excellent in low light.
Will JIP review the product range? For sure any situation like this sees a range rationalisation exercise. This means some SKU may be discontinued and some products in future roadmap never go to market. Olympus America website quickly put up a Q&A to that regards the three key answers are here, on the left what it says on the right what I think it means as the writing is not as black and white as you probably would like.

QuestionOfficial AnswerMy Interpretation
Will the Olympus brand name continue to be used?While our official company name will be OM Digital Solutions, you can expect the Olympus brand name to stick around for the foreseeable future. Olympus branded products will continue to be available even after January 1, 2021.The brands that will transfer are OMD and Zuiko. Olympus supply chain is sitting on a lot of old stock and currently all products being made are still branded Olympus, this will continue like that until the transaction closes. The Olympus  brand will continue to be used also because the medical company continues.
This does not mean that the cameras produced under JIP ownership will be branded Olympus and there are strong indications they will be called OMD as the word Olympus is associated with the medical company in the deal information and is not part of the new company name.

Will the new lenses announced as under development for sales in 2020 still be introduced?

There are no plans to change our product launch plans within 2020. Products that have been announced as under development will be introduced to the market as planned. You can find the most up to date information on product launches by visiting: http://www.getolympus.com

Olympus can only guaranteed what happens when they own the camera business. All things planned for Winter 2020 are going to happen if they happen before 31/12/2020 afterwards they do not know.

What is the future of Micro Four Thirds? Is there any change to the proposed lens roadmap? Will there be a future replacement for my Olympus product?
We are not able to comment on future product development at this time. For the most up to date information on Olympus products in the Americas, please visit: http://www.getolympus.comThe lens roadmap is an Olympus document what JIP will do with it is not something they know. In fact it is very likely to change if those projects are not going to provide a solid business case. They can also not comment on future cameras nor Micro-Four-Thirds are that is no longer their business

Also to be noted Micro-Four-Thirds is an open standard the fact that Olympus runs the four-thirds website does not mean anybody has to pay Olympus to make an MFT camera. So there is no issue of licensing rights connected to the MFT standard which only relates to AF and AE this is the reason you see many manual lenses not following the standard or not being listed.

Conclusion


The divestment of Olympus Imaging business is a sad moment for most as it marks officially the end of a legacy for what concerns Olympus corporation. With the performance that the business has had in the last years this was not avoidable. The new ownership will start with a streamlined business, a focus on manufacturing and a clean slate with no debts or old inventory to clear. OMD will also start with some good assets the IBIS and Auto Focus developed by Olympus are very effective and can play well especially if the new focus is on video. New more dynamic businesses like BlackMagic Design and Zcam are having success with the MFT format for video and this is an opportunity that Olympus missed entirely and hopefully the new company will grab. Will this be enough to save the MFT format from extinction? Definitely video is a more profitable segment where there are no smartphones that can really compete for those who want to be really doing a good job because the devices heat up, run out of battery and finally the editing process is still too complex that requires a workstation. I hope the OMD business can fully realise the full potential of MFT and provide a truly hybrid system, something Olympus failed to deliver with their still focussed product line. In the short term, and by this I mean the next two years, not much will change to the user experience, but we need to understand if Micro-Four-Thirds will have enough traction to continue for photography with new models or it becomes a video specialist segment.

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