Grim times for Leica

http://online.wsj.com/article/SB122152103387739231.html

Loved the WSJ article. I disagree with the writer's assessment of recent losses in revenue. I think it's more a function of declining world economies, specifically the US. There's definitely a high correlation between demand for luxury goods and disposable income. And look Leica's not Lehman Brothers, they haven't leveraged beyond what their capital can maintain. I think Leica will be around for a long time. Thanks...

Not a a pretty picture at all. Quarterly sales are down 50% (25 Million Euros) and they're hoping that their new products' sales will "take off". Don't count on those few new products to take off in this economy. Seems Leica is dammned if they do and dammed if they don't. They raise prices and are criticized, then they bring out a more affordable line of Summarit lenses and are criticised.

 

Their own commitment to quality is their demise in the end. By building cameras and lenses that so far have lasted 60 or 70 years and will most certainly work fine when they are 100 years old, Leica killed themselves. Leica appeals to us old farts, not the 20 or 30 somethings who have the buying power and the desire to buy new camera products.

<i>They raise prices and are criticized, then they bring out a more affordable line of Summarit lenses and are

criticised.</i>

<p>Who criticized Leica for its new Summarit lenses? I honestly don't recall reading of anyone who did.

Personally I think that was the smartest move by Leica in decades. The problem is, they failed to a) bring out an

entry level rangefinder to go with the lenses, and b) market the lower priced "entry level" set to new

photographers. What's the use of (relatively speaking) bargain-priced lenses if the only body you've got is

$5,000? If you were 20-something just starting out a career and family, looking at a Leica M8 with all its issues

vs. say a digital Rebel, what would you do? Most kids aren't retards, and even if they are, their wives usually

aren't.</p>

 

<p><i>Their own commitment to quality is their demise in the end.</i></p>

<p>Their demise will be a result of a failure of self-placement in a market where their traditional customers are

getting old and dying off. There is, and always will be, a significant market for premium lenses as long as

they're not stupid ridiculous (like $10k for a Noct). By most accounts, for example, the Zeiss ZF lenses for

Nikon have been very successful, and I predict a likewise outcome for the new ZE (Canon EF mount) versions. But

in today's market, you can't bring out a $5,000 body that requires IR filters, has a removable baseplate as an

artifact from their irrelevant film bodies and needs to be shipped to Germany for repairs. Not when other

manufacturers offer so much more, for so much less.</p>

The referenced article gives a wrong impression. There were small cameras before the Leica. Kodak introduced 127

film in 1912. They introduced a "vest pocket Kodak" line the same year.

Take a look at the photo in the article. I assume this photo was originally done with Leica's help. It shows exactly what the branding is and why they are where they are. New products aren't as big a problem as the face they present to the world.

So I think two factors enter into the loss in this reporting period. The first is that Steven Lee significantly

overproduced Summarits - he built twice as many as he sold, which means he's invested a lot of today's money in

tomorrow's inventory. It was probably a bad business decision, and must have contributed to his departure. The

investment in inventory will probably eventually pay off, but it will take a long time and be a liability on the

balance sheet during that time.

<p>

The second factor is that Leica has invested a lot of money in development of new products, some of which we've

seen (like the 0.95 Noctilux and the 21 and 24 Summiluxes) and some of which we have not (like <a

href="http://www.l-camera-forum.com/leica-forum/digitalforum/63567-afrika.html">AFRika</a>) we haven't. The

return on this investment is still in the future.

<p>

This was going to happen sooner or later; Leica had for years made negligible investment in the future. This

caused them to fall farther and farther behind the market. Now they're paying the price of that neglect - both

in fall-off of sales of traditional products and in the need for investment in new products - all at once.

<p>

The fact that they're paying the price is good news. The uncertainty of the payoff on their investments is the

downside.

<p>

In three years, we'll know if they did the right thing.

>> Who criticized Leica for its new Summarit lenses? I honestly don't recall reading of anyone who did.

 

 

Maybe not on this forum so much, but on others. And perhaps not really 'criticism', more expressions of disbelief: "if you're going to buy

a new Leica lens, buy a real one (= Summicron or Summilux); if all you want is f2.5, buy a Voigtlander....". Maybe I'm a bit sensitive

because I did indeed buy a Summarit 50mm.

 

My own feeling is that there has been an enormous shift, and if anything it's getting bigger: you could argue that what we've seen so far

has been simple digitisation of existing camera-types (SLR & compact). New types will emerge; some already have (e.g. cell phone

cameras), more are on their way (e.g. Micro Four Thirds, video on DSLRs). Leica is a company wedded to tradition, and expensive to

boot; I don't think that's a healthy mix in a fast-changing environment.

 

Look at Morgan cars: there are some people (a very few) who regard them as the last real car in the world, but most buyers won't go

near them. Morgan is still in business - they made 630 cars last year. I suspect that Leica will become the Morgan of the photo world.

Regardless of the world economy, there will still be those with money to burn, and those people will still look to the prestige

brands--Porsche, Rolex, Tiffany--to set themselves apart. I doubt Rolex feels the need to produce a quartz watch, and I

doubt that the Leica brand will benefit from taking their brand down-market. They can and should be creative in other ways.

are the summarit lenses that bad?

"Regardless of the world economy, there will still be those with money to burn"

 

True, but those people with $5-8K to spend on a camera are giving it to Canon or Nikon these days. Leica will always have a devoted wealthy following of course, but it has also relied on people of average economic means who pinch pennies elsewhere in order to afford what they perceive to be the best photo equipment (Leica) and more than a few of them reside in the U.S. With the poor value of the U.S. dollar these days and the increased cost of living I would imagine these people are putting any purchase of new Leica gear on the back burner. The used market and the realization that comparable (perhaps better) results can be achieved with less money elsewhere are both taking their toll on Leica.

Consider this, that amongst the population of affluent society, there are far more numbers who appreciate luxury automobiles, watches, stereos, clothing, etc. than who appreciate luxury cameras. Many who will drive Mercedes, wear Patek, buy $5000 suits and $2000 shoes, still consider $6000 for a camera and $7000 for a lens as insanity. By the same reason, as rich people are somewhat affected by slowing economics, they are most likely for the sake of showing off, continue to buy those items (car, watch, clothes) which universally are recognised as status symbols. A camera such as Leica is only a status symbol for other Leica afficionados. Among the population at large, the name Leica has no panache. It is what their grandfather had--maybe. Most likely their grandfather had a Kodak Brownie.

I think Daniel Lawton and L DaSousa hit it right on the mark...

Leica invented the af lens? Learn something new everyday.

Well, anyway, Leica has outlived Lehman Brothers and it is possible we'll all be fondling our M8.2s when AIG is no more.

That means the number of guys who can afford the M8.2 are getting smaller every day in this economy.

It is obvious there was a big conflict in management style at Leica. Mr. Lee's top-down approach did not go down well. One hopes the new

management, under Dr. Kaufmann, will continue to focus on high quality products -- not profit above all.

I think they'll survive- the new owner guy has coarse wads of old german cash money and seems to love the company and

want it to succeed. I'd be very surprised if they don't bring out a full frame m (with a sensor upgrade option for current m8/8.2

owners) in the next couple of years. It doesn't make sense that they'd introduce a lens like that new 50mm noctilux to have it

used as a 66mm (there's no way they'd go to that expense to offer a lens better suited to a film body). As to the current

price, it is too high, but the "upgradeable" idea of the m8 is a pretty sensible, modern approach- it works just fine for the

playstation 3 and the iphone.

They're never going to have the market share or resources of canonikon, but then they never did. Anything hand made in

Germany by skilled workers tends to be expensive. I mean, have you seen the price of lederhosen?

"Look at Morgan cars..."

 

Morgan cars are not expensive. I doubt many people have them as their only car. But for a fairly reasonable amount, it can be a fun car to have on a sunny day. Sure, Leica is cheaper than a Morgan car, but you cannot get 10 Toyotas for the price of one Morgan. You can get ten Canons or Nikons for one M8.2

 

"I doubt Rolex feels the need to produce a quartz watch"

 

Rolex has a quartz watch, Rolex Oysterquartz. At least it did in the past.

what a surprise to learn that they created the autofocus... and then essentially gave it away. or the 1996 $30,000 out of control megapixel camera. i would've never thunk either in a hundred years.

 

i saw Canon and Kodak mentioned in the article. yes, they are *competitors*, but i'm not convinced that they are direct competitors. what i mean is when folks consider alternatives to a Leica body, is it really something from Kodak?

 

what companies really do go head to head with Leica (without the Panasonic) and how have they been doing over the last 3-5 years...

<P><I>have you seen the price of lederhosen?</I> Excellent shot, very pertinent. Leica is to modern cameras what lederhosen are to modern casual clothes.</P>

I just got a complete Mamiya RZ11D kit with 6 lenses and a tilt shift adaptor ( all mint) in exchange for a chrome M 35 lux aspherical. The world is full of weird preference sets. There is no unifying logic or rationale there just is what is. Wouldnt have it any other way - would you?

Well, I am sure there is a market for Leica. They just need to concentrate on it. With all the new

multimedia-computers like the Canon 5D Mark II, Sony A900 and similar monsters, a small, but important niche

would be the simple, but perfect camera, similar to the M8, but with a full frame sensor.

 

Concentrating on full frame sensors, 2 bodies (M8.x and a cheaper alternative), a cheaper line of basic lenses

(summarit is the way to go) and some highly priced specialties, Leica in my oppinion could earn money for good.

There ARE enough people around, and the more Nikon, Canon and others computerize there cameras, the more the

request for something solid and simple will arrise.

 

Just concentrate, don't get lost in super-duper-lenses noone really needs. Keep it simple, and perfect. That's

what Leica has been about in the past, and what it will be about in the future.

 

Just my thoughts, enjoy,

 

Holger

They obviously don't have much of a licensing stream from their badge-engineered products with Panasonic, and their core products' customer base is shrinking. To make up for a lower volume of new bodies and lenses they have been forced to price them ever higher. In a business the size of Leica, revenue is king. That is why you are seeing a $10,000 new lens. They understand that it is a ridiculous product from the standpoint of working photographers, but selling 500 of them to collectors will generate maybe $4M in revenue all based on a slightly re-tooled lens from the 1970's. All this in a company stuck with German employment laws which make it very hard to fire anyone, and, judging from the article, a sense of entitlement from its management. Not to mention that the road in the future for new products will be difficult to navigate from the standpoint of intellectual property. There is an awful lot of technology tied up in Canon, Nikon, Pentax and Olympus patents these days.From a business case perspective it looks like a company that will need at least $100 million in subsidies and R&D investment before you could conceive a decent ROI, and that is not a sure thing-- I think they've already sold most of the M8's that will ever be made....<p>Having said that, I think the most likely downstream path will be one like the old British car companies. Eventually the majority owner will tire of dumping $10 Million or more into the till every year and the company will become someone's deep pockets toy-- think Aston Martin, Bentley, Rolls Royce. If they're lucky someone will dump enough money into it while preserving the brand equity so that a few years hence you'll see a genuinely improved product, like the current Astons. If not, you'll see it turned into Bentley, a bespoke body sitting on top of a VW chassis.

Leica has been in and out of financial hot water since I first became interested in photography in the late 1970's. Back then, their product line consisted of M-series rangefinders and an R-series 35mm SLR. Today, their product line consists of M-series rangefinders and an R-series 35mm SLR. In those 30 years, an entire generation has grown to adulthood using cameras with features and functions that Leica has never offered. Realistically, the amazing thing is that they're still around, not that they're once again swimming in red ink. But they'll survive as they have for decades, as a niche company offering fabulous optics wedded to a concept of image-making that's at least an entire generation out of sync. Whether they'll be around in 25 years without some substantial concessions to changing times and changing needs remains to be seen.