Japan's Konica Minolta Holdings Inc. said on Thursday it would withdraw from the camera and color film businesses, marking the end to one of the best known brands in the photography world.
As part of the surprise move, Konica Minolta said it would sell a portion of its digital single lens reflex (SLR) camera assets to Sony Corp. for an undisclosed sum and cease production of compact cameras by March.
The company said it would stop making photographic film and color paper by March 2007, pulling out of a market shrinking more than 20 percent a year due to the spread of digital cameras, which don't use film to store images.
The world's third-largest maker of camera film after Eastman Kodak and Fuji Photo Film Co. had said in November that it would slash its loss-making camera and film operations, but not completely shut them down.
"I wanted to put a clear end to the matter," Konica Minolta President Fumio Iwai said at a press conference, where the company also announced that Iwai would be replaced by Vice President Yoshikatsu Ota on April 1.
Konica Minolta said in November it expected to post a group net loss of 47 billion yen ($407.9 million) in the year to March as it took a charge of 90 billion yen to rationalize production, write down assets and cut jobs in its camera and film division.
But the decision to completely pull the plug on the business caught analysts and archrival Fuji Photo off guard.
Konica Minolta, created in August 2003 through the merger of Konica Corp. and Minolta Co., has a long history in the camera and film markets, producing Japan's first photographic paper in 1903 and the country's first color film in 1940.
Following the news, Fuji Photo issued a press release saying it would continue making traditional camera film, although analysts said Fuji could be pressured to downsize its business.
"Konica Minolta's move is a positive surprise and I was also not expecting Iwai to step down. This is a bold move rare among Japanese firms," said JP Morgan analyst Hisashi Moriyama. "I think the stock will go up. The traditional camera and film businesses were seen as a barrier to earnings growth and now it will be completely gone."
Prior to the announcement, shares in Konica Minolta closed up 3.1 percent at 1,278 yen, while Sony rose 0.8 percent to 4,900 yen and the Nikkei average closed up 2.3 percent.
Boon for Fuji?
Konica Minolta also said it would stop production of minilabs, machines installed in photo shops and retailers for developing and printing photos, by March. Other makers include Fuji Photo, Kodak and Noritsu Koki Co.. Noritsu will take over maintenance and service of Konica Minolta's minilabs.
By ditching its unprofitable operations, Iwai said the company could focus resources on more promising areas such as color office copiers, liquid crystal display materials, medical equipment and optical devices.
Sony and Konica Minolta formed an agreement in July to jointly develop digital SLR cameras, which are generally more expensive and offer better performance than point-and-shoot compact models, and typically use interchangeable lenses.
Konica Minolta said it would continue to produce digital SLR camera bodies and lenses for Sony based on its Maxxum/Dynax mount system and owners of those lenses will be able to use them on new digital SLR models to be developed by Sony.
But the Konica Minolta brand will disappear, ending a legacy that started when a predecessor of Konica introduced its first camera in 1903. The first Minolta brand camera came in 1933, followed by Konica in 1948.
JP Morgan's Moriyama said Konica Minolta's exit would be a positive for other camera makers such as Canon Inc. and Nikon Corp. as there would one less competitor in a market marked by fierce competition and sharp price falls.
Konica Minolta's camera business lost 7.3 billion yen on an operating basis in the 2004/05 business year, struggling in large part because it doesn't make its own image sensor chips, a key factor in determining camera performance and cost, Iwai said.
Makoto Kurosawa, an analyst at CLSA Asia-Pacific Markets, said Konica Minolta departure from film could be seen as a short-term positive for Kodak and Fuji Photo as it would ease supply, but that the outlook for the film market remains tough.
Belgian company Agfa-Gevaert sold its traditional film business in 2004 and Kodak has been downsizing its operations. Fuji Photo has been implementing reform incrementally but has stated clearly its intention to stick with film.
"It's not as if demand will disappear overnight so in the short-term this is a positive as competition will decrease," Kurosawa said. "But over the long term the pressure will be on Fuji Photo to find a strategy for continuing the business without spilling red ink."