Leica focus on future – Statistical Data Included
One of Europe’s great high-tech icons has been hit by a combination of Asian recession and strategy errors.
Leica still makes the world’s finest 35mm format cameras – as it has for most of this century – but it is struggling to get its finances back into focus. The black-cased camera with the renowned red-dot logo recently slipped into the red.
Profits have become losses, a major acquisition faltered, the share price fell from A$52 to A$28 in eleven months, and the executive chairman resigned.
Klaus-Dieter Hofmann, credited with lifting the company from slump in the 1980s to record profits of A$14 million in 1996, quit because of “disappointing and unsatisfactory results” in 1997-98.
In that financial year Leica lost A$18 million despite record sales of over A$275 million. Leica’s latest annual report says Mr Hofmann, 44, will stay on as a consultant while the company restructures – a process he had already started.
Unlike other chief executives, European and Australian, who have recently clung to office despite falling profits, Hofmann stepped aside with good grace, announcing his own resignation in the annual report.
He says he quit “as a consequence of not achieving the objectives we set” and leaves Leica healthy enough to recover fairly quickly.
Certainly there’s no talk of shutters coming down at the Leica headquarters at Solms, near Frankfurt, where the legendary camera is built by craftsmen with traditions going back to 1914.
Hofmann’s mistake was Minox – the miniature (8x11mm format) cult camera beloved by spies and the authors of espionage thrillers.
Leica acquired Minox three years ago from its German owners but the combination has been slow to work. “The failure of our Minox strategy,” as Hofmann calls it, coincided with a A$30 million drop in Leica sales in Asia. There sales fell from 23 percent to 18 percent of total sales.
Although sales in Japan – home of Nikon and Canon cameras – actually increased 10 percent in 1997-98, other Asian markets for Leica contracted. Among those who stopped buying were Asian tycoons who had been avid collectors of custom-made Leicas, some of them with gold and diamond trimmings.
Leica’s biggest markets are now Germany (34 percent) and United States (19 percent).
Leica’s recent setback is the latest in a complex corporate history in which the fame and excellence of the product is in frequent contrast to the state of the company.
For MBA students Leica makes a fascinating case study in which the managers often lagged behind the makers, and the designers for many years dominated the marketing side.
In the 1980s the rise of micro-electronics and the consequent advance of Japanese brands revealed Leica as slow, under-capitalised and under-invested. Leica was losing A$8 million to A$l0 million a year, although retaining legendary status and loyalty among camera professionals and collectors.
Leica was a loss-making part of the large Leitz optical group, an unprofitable hobby for the company – the Rolls-Royce of cameras with a priceless brand name.
Leica ignored fancy electronics in favour of such traditional mechanisms and strengths as featured in its classic “M” camera series: optical performance, precision, easy handling, and elegant design. Celebrated “M” users include the Sultan of Brunei and Queen Elizabeth, who appeared on a UK postage stamp clutching one of her M3 models.
In 1988 Leitz decided to give Leica the chance to sink or swim as a separate company.
Then followed four years of corporate chopping and changing. In 1990 there was talk of selling to an American investor. In 1992 some executives attempted a management buy-out but failed.
In 1994, Hofmann, an accountant who had survived the changes to become chief financial officer and then President of Leica, succeeded in a buy-out and took the company public in 1996.
The A$22 million float of 4.5 million shares was welcomed by banks and investors. Profits reached a record A$14 million and sales passed A$250 million for the first time as Leica introduced its first new series for 30 years – the “R” range.
Then came the Minox mis-match and the Asian recession. Leica is solving the Minox integration problems, but Asian sales will be slow to recover.
Minox has introduced a miniature telescope, small enough to fit in a spy’s palm, new mini-binoculars and a 35mm format camera with a three-power zoom lens.
Leica is now going digital, a field Hofmann calls “the market of the future”. The Leica S1 digital scanner camera is the company’s first entry into filmless computer-based image recording and processing.
It is aimed at professional users in publishing, advertising, archives, museums, galleries, science centres and Internet catalogues.
(With the Leica S1, and other digital cameras, the film is replaced by a high-resolution electronic sensor with which the light rays projected by the lens are converted and recorded as electrical signals.
After conversion of these signals into digital data, they can be converted into a high-quality image on the computer. This process not only saves time and material but also enables an almost infinite variety of options for the manipulation of the image data.)
One German museum has bought a set of Leica digital cameras to record 50,000 rare and valuable manuscripts and graphics, a total of 2.5 million pages.
Leicas themselves can be museum pieces and valuable collectors’ items – works of art in the eyes of many. Rare models command huge prices – about A$120,000 for the gold-plated Luxus model of the 1930s, for example.
A more modest model, from a 250-unit class, was recently bought in Sydney for A$2000 and resold in Germany for A$5000. (The Leica agent in Australia is on 03-9369 7811).
The Sultan of oil-rich Brunei, the world’s richest man, was Leica’s best customer for special models, until recession hit South-East Asia in 1997 and the slump in global oil prices.
The Sultan liked platinum and jewels added to his choices – bad taste in the opinion of traditional Leica lovers, but a nice little earner for the company. The Sultan is expected to resume adding to his Leica collection after a respectable interval.
There are Leica clubs all over the world, from Vienna to Vietnam, some of them as enthusiastic as the pre-recession fans in Korea who used to make annual pilgrimages to Solms, the Leica Mecca, to see the source of their treasures.
Some fans bring or send old models to Solms for repair. A Leica M3, a legendary model from 1954, can still be repaired because Leica retains reserves of skills and spares.
The camera has its own Internet web site (www.leica-camera.com) with 130 pages in German and English. About 30,000 Leica lovers from 90 countries “visit” the site every month.
The Leica Academy in Solms is dedicated to the concept that photography is a “higher cultural technology” which can be learned and perfected. It provides Leica photographers, as well as those who wish to become Leica photographers, with technical know-how, exercises in photographic creativity and experiences with Leica products.
The Academy organises visits to nature reserves and other photogenic places in Germany. Overseas camera trips are also organised, recently to Greece, Scotland, Lapland and Tanzania. (Tel. Germany, 06 442 2080)
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