There have been two significant consolidations in the photo industry recently.
Nikon and RED
Just three days ago Nikon announced that it has acquired RED Digital Cinema, a leading maker of high-end digital video cameras for moviemaking. RED will become a wholly-owned subsidiary of Nikon. The leading independent online website centering on all things Nikon, ByThom.com, has an article about it in its News/Views section. Thom says he has "witnessed a resurrection of energy, enthusiasm, and excitement at NikonUSA" since the Z9 was announced, and that "that got another boost with last night’s announcement." He also notes that "the RED acquisition puts Nikon back in Hollywood." Nikon's press release is unspecific about potential advantages or future plans, and the majority of commentators don't seem to know quite what to make of the announcement. But all in good time, no doubt.
Will the acquisition "make it rain" for Nikon? The hope is that mergers and acquisitions by companies with cracks showing in their core business model result in increased synergy and dynamism for both companies involved. Less encouragingly, it's also a common behavior of companies that are flailing around trying to find a cure for what ails them; studies show that 50% of acquisitions don't succeed (Wikipedia, citing Investment Banking Explained pp. 223–224). In a weather report, you know what a 50% chance of rain means. Might rain, might not.
Nikon is currently third in market share among cameramakers, having ceded second place to Sony in 2019. Sony now has more than double Nikon's market share, with 26.1% against Nikon's 11.7% in December of 2023, according to Statista.
Although market share has been declining for years, however, the company is showing strength by other metrics. Nikon's Z cameras and lenses are highly thought of by committed amateurs, artists, and pros alike, and, like Leica in the film days, seem to be responsible for more good work than their market share by itself would predict. Here's hoping the RED acquisition works for Nikon as its executives intend.
Lensrentals and BorrowLenses
Lensrentals has acquired "select assets" of BorrowLenses, a would-be competitor. I think it's safe to say the former bought out the latter's inventory and customer lists. This acquisition was most probably done for old-fashioned reasons, namely, because the acquiring company is so good it's tough to compete with. Have you rented a lens or a camera from Lensrentals recently? Those people have the process down. It's impressive.
Lensrentals' press release states, "The acquisition will expand Lensrentals’ loyal customer base while augmenting its enormous inventory of more than 400,000 copies of over 6,000 different lenses, cameras, drones, lighting, audio and other high quality production equipment and accessories, in every format, from every major manufacturer available in the market. Additionally, the used gear program known as Keeper will also receive a significant boost in inventory." Keeper, if you don't know, means that you can buy equipment you've rented if you'd like to hang on to it after trying it out as a rental. This is great with lenses, because lenses still do have sample variation, as Lensrentals' owner/guru Roger Cicala makes obvious with real published data from time to time. If you love the way a certain rented lens renders, it's safest to buy that specific one rather than buy a new copy and spin the roulette wheel again.
Mike
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Featured Comments from:
Jon Porter: "Very disappointed to hear BorrowLenses is going away. I used them for years to try out cameras I was considering buying. Their West coast office was nearby so I could easily pick up and drop off gear, as well as chat with their staff about the camera. Now with the added hassle and expense of shipping it's not worth bothering to rent."
Jayanand Govindaraj: "Nikon's market share is declining, which only means they are, very sensibly, getting out of the point-and-shoot and other low-margin categories. Their margins are increasing as they focus more and more on high-value-added products, and their financials have become robust in the last few years.
"As an aside, in the last four years, Nikon equity has almost tripled on the Tokyo Stock Exchange. As a corporate finance professional through my working years, if you ask me, the camera brands that will be the first to disappear, if at all, would be Sony or Panasonic—the camera division within both these companies are insignificant in terms of size in relation to the behemoths that both the companies are, which means that they are inconsequential to the overall performance of the parent, and could be axed (or sold) the minute the need for cost cutting arises."
robert e: "RED+Nikon sounds very cool to me. Not that I have any expertise in this area, but on its face, I see two companies with core strengths that don't overlap but could complement each other very well. A maker of superb cinema bodies joining a maker of superb lenses; a well established presence in high-end digital cinema joining a legend in pro and consumer photography. Nikon has arguably caught up technically in hybrid video, but is having trouble competing with the head starts and reputations that Sony, Panasonic and Canon enjoy in that space and in the budget cine space. RED has no presence in either space but it would bring enormous prestige to compete with."
Mel: "Lensrentals definitely has the process down. And Roger's blog is full of technogeek information on bodies, lenses, testing, etc. I've rented from them several times and was never disappointed. Great way to try out a lens to see if it fits my needs."
For what it's worth, it turns out that it is very, VERY hard to tell whether an acquisition was "successful" or not. There are multiple reasons for this.
First, the acquiring company often stops preparing separate financial statements for the acquired company. Instead, they usually just get folded into the acquiring company's consolidated financial statements, making it impossible to compare pre-acquisition projections with post-acquisition performance. So...how do you know if it was "successful"? You could argue that the acquiror predicted the acquisition would add $[x] in earnings to its results, or result in $[y] of savings, but the earnings of the acquiror will never go up by exactly $[x] or $[y] because of fluctuations in the results of the acquiror's legacy business, and it's hard to pull those factors apart when the results are consolidated.
Second, even if the acquiror continues to prepare separate financial statements for the acquired company, those separate financial statements will be very different from the pre-acquisition financial statements of the acquired company -- many corporate functions will be removed, and the acquired company will get allocated a portion of the overhead costs of the acquiror, which means you're comparing apples to oranges.
Third, most acquisitions are supposedly "strategic" acquisitions, and the acquiror will divert the operations of the acquired company to pursue it's own strategic goals. Again, this makes pre- and post-acquisition predictions and performance hard to compare. Again, you could argue that the measure of success is whether the acquiror achieved its strategic goals, but (a) those goals are often pretty vague (at least in terms of how they are publicly presented), and (b) you have the same problem as in the previous paragraph: if the acquiror doesn't achieve its strategic goals, is that because the acquired company didn't perform...or because the acquiring company mucked something up in its legacy business?
Fourth, many acquisitions are made for reasons other than financial performance. Some companies are acquired just for the purpose of allowing the acquiror to issue a press, or to have something new/interesting to talk about in its sales cycle. The performance of the acquired company may be completely and utterly irrelevant. Whether those things are successful or not is hard to measure because: well, all of the reasons above (vague statements / strategic goals are hard to measure, and its hard to separate out what results (whether good or bad) are due to the acquisition vs. the acquiror's legacy business.
Anyway, I hope both of these acquisitions are successful (you may wish they didn't happen, but once they've happened, there doesn't seem to be much reason to hope that they are a flop).
Posted by: adamct | Monday, 11 March 2024 at 03:20 PM
Nikon needs a new revenue source, as they are being shut out of integrated circuit photolithography market.
As integrated circuit photolithography goes into the extreme ultraviolet (EUV) wavelengths to make smaller transistors, transmissive refractive lenses are no longer feasible. In the $250,000,000 machines ASML makes, they use many large mirrors with complex aspherical surfaces.
https://www.asml.com/en/technology/lithography-principles/lenses-and-mirrors
Zeiss is apparently ASML's partner in making these mirrors.
https://www.zeiss.com/semiconductor-manufacturing-technology/smt-magazine/euv-lithography-as-an-european-joint-project.html#:~:text=The%20Dutch%20company%20ASML%20is,a%20development%20alliance%20with%20ZEISS.
Nikon just isn't a player in ASML's EUV machines. They apparently made an effort at EUV technology, and had to give up. I think Intel also tried to do it on their own, and failed.
The optical lenses that Zeiss and Nikon made for photolithography were very expensive, and surely very profitable.
Another nice feature of the cinema market (RED) is that it's isn't as cyclical (boom-bust) as the semiconductor industry!
Posted by: John Shriver | Tuesday, 12 March 2024 at 09:18 PM