In all the excitement....

[jaapv]

The last financial report of Leica seems to have escaped notice. It paints the picture of a company that is slowly finding its feet again. A very interesting point is, that the price increases in the USA have not hurt sales there at all, rather the opposite.

Quote:
Leica Camera Group, Solms, has closed fiscal year 2005/2006 (FY end 31 March) with sales of € 106.7 million. This is 15.9 % above the previous year’s figure of € 92.1 million. The earnings before income and taxes which have been adjusted for restructuring expenses have improved from € –10.6 million to € 0.6 million compared to the previous year, mainly as a result of increased sales. At the same time the Group net loss has decreased from last year’s € 18.1 million to € 9.2 million in fiscal year 2005/2006. The Group net loss of the previous year includes a loss of € 1.9 million from abandoned lines of business.

System cameras sales have risen by 12.2 % to € 34.5 million. With the LEICA DIGITAL-MODUL-R a digital product contributed to sales in this product range for the first time. Compact camera sales, particularly of digital models, have risen by 6.6 % to € 16.9 million. In the Leica sports optics range a growth by 20.5 % to € 36.4 million has been registered, in particular with regard to binoculars with integrated laser rangefinding. Slide projectors sales have suffered a further decline by 19.0 % to € 1.8 million.

International sales have increased by 20.1 % compared to the previous year’s figures and amount currently to € 86.4 million or 80.9 % of total sales. For the first time the US market is the Group’s most important individual market with sales of € 26.2 million or 24.6 % of total sales. With sales of € 20.4 million or 19.1 % of total sales the slower growing German market still remains an important market for Leica Camera Group.

In fiscal year 2005/2006 earnings before income and taxes (EBIT) improved from € –14.7 million to € –6.2 million. The income from the write-back of provisions and valuation allowances (€ 2.4 million) had a positive effect on the total result. Restructuring expenses burden the FY result with € 6.8 million compared to € 4.0 million in FY 2004/2005. The net interest income which is negative due to the continuing high drawing on credit lines developed from € –2.4 million in the previous year to € –2.8 million.

For the first time the financial statements were prepared according to the international IFRS standard. The figures for the previous year have been calculated according to the same standard to facilitate comparability. Hence they differ from the previously published figures which were calculated according to HGB (German Commercial Code).

But I think they need the M8 to succeed. Desperately.

 

[Mackinaw]

But I think they need the M8 to succeed. Desperately.

No doubt there's a lot of interest in the M8. Take a look at the hits this new M8 forum has generated, over 10,000 views in less than a week.

Leica's still got it guys.

Jim Bielecki

 

[John Camp]

No doubt there's a lot of interest in the M8. Take a look at the hits this new M8 forum has generated, over 10,000 views in less than a week.

Leica's still got it guys.

Jim Bielecki

Yeah, but most of that traffic was probably generated by about 200 guys. I hit it about 30 times myself.

 

[ch1]

......

But I think they need the M8 to succeed. Desperately.

With continiuing negative EBITDA not only do they need the M8 to "succeed", they need it to be successful in order for them to "survive".

My point has been that the M8 will provide a short to mid-term solution for Leica since it will exploit a pent-up demand from loyal customers finally realizing their desire to shoot digital deluxe.

Of course, it will be up to Leica to ensure it can maintain sufficient production capacity to meet this pent-up demand.

Even if they do, the problem for them will be what to do for an "encore" once the first wave of enthusiasm and purchases wanes.

My guess is that this move should enable them to clean-up their balance sheet and return them to a modest level of profitability whereupon they become an attractive take-over candidate for a larger manufacturer capable to maintaining a high-end, low sales volume luxury brand.

Remember, Leica is now controlled by a private equity investment group. At some point (a year or two if the M8 is successful?) they will look to realize on their investment.

 

[jaapv]

Well, they will have clean digital lineup in the digital P&S and S-system in cooperation with Panasonic, the M-system and R-system. In addition the last analog camera's on the market (well not quite-but nearly) in the form of M a-la-carte and R-bodies and a supply of lens expertise to third parties. Then of course the binoculars and other optical systems. All in all it looks like a well-structured product line to me.

 

[ch1]

Well, they will have clean digital lineup in the digital P&S and S-system in cooperation with Panasonic, the M-system and R-system. In addition the last analog camera's on the market (well not quite-but nearly) in the form of M a-la-carte and R-bodies and a supply of lens expertise to third parties. Then of course the binoculars and other optical systems. All in all it looks like a well-structured product line to me.

Agreed, but with salues under EUR200MM they have little room for error. As per the press release above they are still bleeding cash - neither creditors nor investors will have infinite patience.

Their product mix is impressive but remember it is all at the high end leaving little room for error. This is why I think their ultimate goal should be to find a larger corporate "umbrella" - perhaps a Canon etc. - who can provide synergies in areas such as R&D and marketing.

 

[bmattock]

Well, they will have clean digital lineup in the digital P&S and S-system in cooperation with Panasonic, the M-system and R-system. In addition the last analog camera's on the market (well not quite-but nearly) in the form of M a-la-carte and R-bodies and a supply of lens expertise to third parties. Then of course the binoculars and other optical systems. All in all it looks like a well-structured product line to me.

Not even close. The digital market is not the market Leica knows. Product turnover is on the order of once a year - max. Leica builds for product turnover of once a decade. How good will that M8 look in a decade? How about those PnS's?

Leica is caught in a classic market pincer, and it is not entirely their fault. Build quality and excellence of execution is their forte - but the market that values digital cameras does not value that. The purchasers of the M8 will be loyalist existing Leica customers - they will not attract new customers, no one will pay $5,000 for a body only that does not even offer what the newest Sony dSLR will in terms of features. And in a year, the M8 will look hopelessly archaic.

Leica had to play this game - their loyalist customers demanded it - but they cannot succeed at it.

They have a better chance to succeed financially by continuing to dilute their brand name by licensing it to Panasonic for further "Leica" dSLR systems that have the Olympus four/thirds mount. It will eventually eat them from the inside out as it destroys the cachet of the brand-name, but it is their only way out.

Best Regards,

Bill Mattocks

 

[Mark Norton]

The patient is recovering and I agree that in a couple of years, after the first full year of the M8 being in production and the 4/3 project bearing fruit, lets call it Q2 2008, ACM will be looking to cash in, and Panasonic would look to be the most obvious buyer. The temporary CEO will receive his bonus and go back to Schaffhaussen. In the meantime, we should be very pleased Leica are making progress. Far better that than the company going bust.

 

[jaapv]

Agreed, but with salues under EUR200MM they have little room for error. As per the press release above they are still bleeding cash - neither creditors nor investors will have infinite patience.

Their product mix is impressive but remember it is all at the high end leaving little room for error. This is why I think their ultimate goal should be to find a larger corporate "umbrella" - perhaps a Canon etc. - who can provide synergies in areas such as R&D and marketing.

I agree that is probably what will happen.

 

[John Camp]

I thinking going to Canon would kill them -- it's like Jaguar goiing to Ford. They get extra money, but the status starts ebbing away, and you get Jags that have a Taurus front end and mushy suspension and it's called "synergy."

I think Leica may eventually become part of a group of boutique companies: Rolex, Leica, Montblanc, maybe even a fashion house like Hermes --- people who know how to market to a select market. That would be a possibility.

I disagree with Bill about the need to constantly innovate. I think that time is passing, (if it hasn't already passed) for digital cameras. Most digitals, you'll note, are now getting very modest upgrades, if any. Most of the latest D2x upgrade can be done on older cameras via firmware, and the last Canon upgrade that I saw (I'm not totally familiar with the nomenclature, but I think it might have been from a 20D to a 30D (?)) was widely ridiculed as cosmetic more than anything.

For years, one of the great driving forces behind rising computer speed was the games community. But once games got close to real-time speed/appearance, things slowed down. Why have a machine that's twice as fast and costs twice as much if you can't really use the speed? When was the last time that there was a big jump in speeds? We went from 1GhZ to 3GhZ probably three or four years ago; why aren't we at six or nine? The answer, I think, is that computer users are now asking for different qualities.

Same is true with digital cameras. I don't think anybody really gives a rat's ass if Canon goes to 22mp, because it's not that much better than the current 16 -- in fact, quite a few people thought that the 1Ds2 wasn't a hell of a lot better than the original 1Ds, or that the 1Ds@ is any better at all than the 12mp Nikon. The fact is, why pay more for more megapixel's if you can't see an improvement at nomal print sizes? A lot of people won't.

So I wouldn't be surprised if the Leica M8 holds up quite well for six to 10 years, especially given the improvement in post-processing tools. And it has qualities that you won't find in a Canon: smallness and lens speed being two. I think the big DSLRs, which are physical monsters (the Canon body alone weighs 3 pounds or so), are simply for a different kind of photography than rangefinders. I would expect after the original rush of orders, that Leica will be able to build and sell ~5,000+ units a year through the next upgrade...And now that they've gotten the original off the ground, I would expect a full upgrade in ~ five years.

In fact, I see this upgrade thing as an opporunity for Leica, not a problem -- if a guy buys two M3s, why would he ever upgrade? Ony because he gets a GAS attack. But if there's a "real" digital upgrade every five years, you might, over 25 years, have guys who have bought 10 new Leicas, rather than two.

JC

 

[ch1]

.....I think Leica may eventually become part of a group of boutique companies: Rolex, Leica, Montblanc, maybe even a fashion house like Hermes --- people who know how to market to a select market. That would be a possibility......

JC

Didn't they already try this route? IIRC, Leica was a part of Hermes. Maybe I'm wrong?

 

[bmattock]

I disagree with Bill about the need to constantly innovate. I think that time is passing, (if it hasn't already passed) for digital cameras. Most digitals, you'll note, are now getting very modest upgrades, if any. Most of the latest D2x upgrade can be done on older cameras via firmware, and the last Canon upgrade that I saw (I'm not totally familiar with the nomenclature, but I think it might have been from a 20D to a 30D (?)) was widely ridiculed as cosmetic more than anything.

I agree that the companies making the dSLRs are now facing revenue stream problems if they don't start extracting more profit from their cameras on a per unit basis. They are doing as little as they can and still be able to announce something new every six months. Let the naysayers say nay - the market continues to buy every dSLR that is made - none sit on shelves. 30D sucks? So what, they'll sell 'em all. And in the meantime, if they DIDN'T make a 30D, it would be the all-Nikon, all-the-time show. So they had to squeeze one out.

However, the dSLR doesn't drive the market, the PnS does. And they continue to 'innovate' whether anyone thinks that is a good thing or a bad thing. The latest round has already been initiated - 10mp digicams. When Joe Sixpack thinks more mp is better, everybody had best queue up and start cranking them out - the qualities that really count don't matter at whit to market forces.

For years, one of the great driving forces behind rising computer speed was the games community. But once games got close to real-time speed/appearance, things slowed down. Why have a machine that's twice as fast and costs twice as much if you can't really use the speed? When was the last time that there was a big jump in speeds? We went from 1GhZ to 3GhZ probably three or four years ago; why aren't we at six or nine? The answer, I think, is that computer users are now asking for different qualities.

Cell phones, baby. Cell phones. PC's are a maturing market, and yes, digicams will eventually get there. The digicam is nowhere near the maturity as a PC. Think cell phones.

Same is true with digital cameras. I don't think anybody really gives a rat's ass if Canon goes to 22mp, because it's not that much better than the current 16 -- in fact, quite a few people thought that the 1Ds2 wasn't a hell of a lot better than the original 1Ds, or that the 1Ds@ is any better at all than the 12mp Nikon. The fact is, why pay more for more megapixel's if you can't see an improvement at nomal print sizes? A lot of people won't.

A lot of people, perhaps, but not a majority of people. Most Joe and Jill Sixpacks know these things about digicams - 1) more mp is better, 2) longer zoom is better, 3) bigger LCD display is better and 4) smaller camera is better. They don't know optics, they don't know AF speed and shutter lag times, and they could not possibly care less. Ask 'em. They shop for digicams that are CUTE for God's sake. And they buy more cameras than 'we' camera mavens do on a 1000 to 1 ratio.

So I wouldn't be surprised if the Leica M8 holds up quite well for six to 10 years, especially given the improvement in post-processing tools. And it has qualities that you won't find in a Canon: smallness and lens speed being two. I think the big DSLRs, which are physical monsters (the Canon body alone weighs 3 pounds or so), are simply for a different kind of photography than rangefinders. I would expect after the original rush of orders, that Leica will be able to build and sell ~5,000+ units a year through the next upgrade...And now that they've gotten the original off the ground, I would expect a full upgrade in ~ five years.

Leica cannot do a upgrade every five years. Period. They don't work like that, and being German and Leica, they won't. It will destroy them, but they will refuse to rush the job. Good for them, and goodbye to them.

In fact, I see this upgrade thing as an opporunity for Leica, not a problem -- if a guy buys two M3s, why would he ever upgrade? Ony because he gets a GAS attack. But if there's a "real" digital upgrade every five years, you might, over 25 years, have guys who have bought 10 new Leicas, rather than two.

JC

True Leicaphiles upgrade because they can. Because they must. Sure they own two M3's. And one of every stupid LHS-only model and all the rarities, including attachments for looking at flea gonads and so on. So of course they will buy two M8's (one to use, one to keep in the box and protect forever). And then that's it. The world only has so many of these guys.

Non-Leicaphiles won't buy the M8. It is the solution to a problem that no one has.

In five years, when they're writing Leica's post-mortem, they will refer to the 'Ill-fated M8'. The one that Leica had to build, but the one that broke them.

Best Regards,

Bill Mattocks

 

[Socke]

For years, one of the great driving forces behind rising computer speed was the games community. But once games got close to real-time speed/appearance, things slowed down. Why have a machine that's twice as fast and costs twice as much if you can't really use the speed? When was the last time that there was a big jump in speeds? We went from 1GhZ to 3GhZ probably three or four years ago; why aren't we at six or nine? The answer, I think, is that computer users are now asking for different qualities.

That had other reasons. Number one is that people realized that more GHz don't make a faster PC and Number two that Intel realized they where on the wrong path with their Pentium IV architecture.

The gamers now use multiple grafics cards in their systems, each more expansive than the typical mainboard and processor with which they are used.

The problem with the P IV is that it doesn't scale with frequency but needs lots of power and produces too much heat. A P IV at 3.2GHz can take as much as 140 watt under load but must not be warmer than some 40°C, ever touched a 100 watt light bulb?

Another thing are the 10 to 14 amperes you have to deliver to the processor via the mainboard. Not easy to find materials which can be used in massproduction, are reasonable cheap and don't go up in flames when the user tries to add a couple off layers in photoshop

AMD was smarter, their CPUs where as fast as Intels, had 64bit support without sacrificing 32bit speed like Intels top notch Itanium and used less power and produced less heat.

The Penium III based Pentium Mobile processors for the Centrino based Notebooks put a Pentium IV at double the frequency to shame with typical office applications as well as most grafics applications.

AMDs dual core 64bit CPUs are heaven on earth for people doing RAW conversion from dSLR files even with 32bit aplications. Same for videoediting. The memory controller in the CPU is much faster than Intels way of doing it with the P IV.

And yet another reason is the delay of Microsofts Windows Vista, usualy the people are fine with their computers until they get the next release of Windows and Office, then they need double the RAM, double the HD space and double the CPU performance

 

[hth]

I have a feeling that the M8 will be a huge success. I also think Leica is smart enough to realize to build it modular; mechanics, shutter module, sensor module and mainboard. Just connect them together. The mechanics and shutter will last a long time and is likely to be more expensive than on any other digital camera. Makes it easier to service, just swap the faulty module and charge the customer (if not under warranty). Also makes the camera have lasting value, something Leica is known for. In 3-5 years you can send it in and have it upgraded to another sensor or more processing power for a (stiff) fee, but it would be worth doing it rather than ditching the whole body.

Leica has had trouble with competetion from their old cameras made over 50 years. I have an M2 and an M4, each cost 1/5 to 1/6 compared to one new body. Why pay full price when I can get the same for far less and also get the vintage feel (provided that I can live without builtin meter)?

The M8 will change this as there is no competetion for it and it will be possible to get even more money out of it in the future, thanks to upgrades and technology advances in sensor and computer power.

The only competition will be from Cosina cameras in various disguises and they compete for the low end of the market. Leica will own their niche market, and I think they have a bright future as a small high end company.

/Håkan

 

[Silva Lining]

I think Leica will be OK. I believe that they would be able to beat the sensor wars if they were to offer sensor/software upgrades on a 3 or 5 years basis. For a fee they will upgrade your M8 sensor as technology advances, much as they are offering to upgrade lenses to work with the M8 now.

This, to me, offers a different business model that removes their admittidly niche product from obselecence, albeit at users choice and cost. It offers the build quality and finish for which they are rightly reknowned with the opportunity to upgrade (and to personalise) which offers continued quality in use and exclusivity that their users demand.

Of course, I have no idea if this is what they are planning to do!!

------
edit : great minds think alike! lets hope Leica go down this route - I'd buy one if they did.

 

[Mackinaw]

In five years, when they're writing Leica's post-mortem, they will refer to the 'Ill-fated M8'. The one that Leica had to build, but the one that broke them.

They've been writing Leica's epitaph for at least five years now (eavesdrop on LUG if you really want to hear the naysayers in action) and yet they're still in business.

As I mentioned earlier this morning, Jorge started this M8 forum less than a week ago and it already has over 10,000 views. Obviously folks are very interested in ths new camera, which can only bode well for the company and its future.

Jim Bielecki

 

[John Camp]

One serious question is, Do any of us know what the **** we're talking about?

That question aside, I would demur from Bill's portrayal of Leica as terminally constipated by pointing out that it still survives, has a new product that is antcipated by a fairly large group of people, and does that while a lot of larger, supposedly tougher camera companies didn't make it. Who would have thought that Mamiya would disappear; six years ago, it owned the working MF market. What I think happened is that for the past 50 years, Leica waddled along, issuing the occasional upgrade, staying small because they didn't much care if they got large. Then, five or six years ago, somebody pressed a gun to their corporate temple and threatened to blow their brains out if they didn't start moving. They started moving. The DMR was actually put together fairly well, and with reasonable speed; lots of people like it. Then the M8 came along, also with a reasonable celerity; I think a five-year upgrade cycle is now within their abilities. Nikon appears to be on a 3-4 year cycle, Canon maybe 3 year, but that will slow.

On a different topic, I just got the Leica Compendium, from Hove, (Has there ever been a Hove book that didn't, in some essential way, really suck?) and there's an unintentionally amusing picture of Leicas being assembled -- by a lady sitting at a desk, with a bunch of screwdrivers and some parts bins, apparently doing them one at a time. I don't know how I *thought* it was done, but that wasn't it...

JC

 

[Silva Lining]

One serious question is, Do any of us know what the **** we're talking about?

I can only speak for myself, but I know that sometimes I have absolutely no idea what I am going on about.

 

[ywenz]

For years, one of the great driving forces behind rising computer speed was the games community. But once games got close to real-time speed/appearance, things slowed down. Why have a machine that's twice as fast and costs twice as much if you can't really use the speed? When was the last time that there was a big jump in speeds? We went from 1GhZ to 3GhZ probably three or four years ago; why aren't we at six or nine? The answer, I think, is that computer users are now asking for different qualities.

eh... nope, chip makers are going in the multi-core direction as opposed to higher GHZ. It has been shown in recent years it's not a function of the cpu in determining the performance of the computer.

 

[rxmd]

I guess at least the resolution wars are more or less over anyway. In the consumer segment I can't imagine things going beyond 20 MP, and the difference between 10 and 20 MP is really stretching it, since image quality is depending on a lot of other sensor properties besides resolution.

I think Leica did the right thing to get involved rather late, at least with the digital M where there's little competition. Leica buffs would have rejected a three megapixel, crop-1.6 Leica M7-D, but this way, with a range of dedicated lenses, I think the M8 promises somewhat more lasting value. Which is the core of the Leica brand, anyway.