"Leica is saved!"

This news article released at 7 PM German time indicates:

 

Leica is saved; 95% shareholders voted yes for the plan; Leica

remains as one company; The German Shareholder Association voted for

the plan to save Leica even though it hurts the shareholders; Keep

the Portugal and Solms factories; Concentrate on bringing a steady

supply of new digital cameras onto the market, a new model every 6

months.

As I mentioned before, Leica would be smart to have the following:

 

1) an inexpensive more plasticey digital camera for the lower end amateurs (like the digital version of the Leica Mini)

2) a flat and slim digital camera for the stylish folk (like the Sony T series cams)

3) a professional digital Minilux/Minilux Zoom with the Summarit lens (winning combo)

4) a professional version of the Digilux 2 to be Digilux 3 and more M-like

5) the digital module back for the R

6) development of the Leica M camera body

 

Leica ought to phase out of the compact film camera market and introduce R-digilenses into the 4/3's mount. It makes no sense to knock off the market for better digital SLR lenses than what Nikon and Canon offer.

 

I had faith in Leica and it's exciting to see them pop outta the tortoise shell now.

If all the wiseheimers spouting advice and/or predictions of doom about Leica were to buy 100 euros in Leica stock they could take the enterprise over and run it to their heart's content, but most probably lack the courage of their convictions and would be no-shows when the chips were down. Besides it is doubtful they could achieve any kind of consensus that could formulate a viable business policy. The future of Leica is certainly a matter of concern for many but so far all the bloviation has been only sound and fury, siginfying nothing more than the inflation of egos.

Would you actually buy Leica stock right now? I would rather spend the $$$ on used Leica

gear. Much more sound investment.

I beg to differ Alfie. I don't think Leica as a company is big/responsive enough to output all those range of equipment you mentioned. Part of the problem they have now is their product mix is quite varied with really only major hit - their M line. I would like to see them concentrate on the Digital M and just lenses - not only for M but for Nikon/Canon/Minolta/Olypmus?Hassie/Mamaiya etc. Make their DMR the last or second last and drop the R al together within a decade. Their expertise is in lenses. 2 two rupees worth.

For film dinosaurs like myself this could possibly mean a glut of previously-owned M bodies on the market as people step up to the long-awaited digital Leicas. As long as Leica continues to maintain parts and service for their film cameras I'm happy.

 

BTW, does anyone know what they mean when they say in the press release that Leica will halve their inventory? Is that simply an accounting device regarding valuation of inventory or do they mean they will actually cut current production in half?

 

Anyway, to borrow Mark Twain's famous remark, the reports of Leica's demise were greatly exaggerated... at least for now it appears.

 

Cheers,

 

Dennis

Sorry but the heading is more like "Leica saved for the moment"

 

Dennis - halving of inventory is confused.It says that the valuation of stock is being discussed with the auditors which indicates that the stock is overvalued in the current market conditions.It also seems to indicate that too much money is tied up in stock ( i.e. overstocked in view of the sales levels being achieved) and they want less money tied up in stock thus releasing money to improve liquidity. Hope this makes sense.

 

The most interesting things to come out so far are 1) the increased investment in "human resources", usually modernspeak for increasing the workforce and 2) the apparent decision to keep as much in Germany as possible and not to outsource more production to the cheaper labour cost locations.

 

There is going to have to be some juggling to keep all these balls in the air. Good luck Leica !

It means they'll be pricing their products to move, not sit on shelves for months.

Well, that means that Leica needs to have a Leica Day everyday of the year. They probably need to become more like IKEA in that respect.

 

And getting rid of the R-line would be horrible. To be honest, I like the R8 better than the M6 especially when I'm shooting portraits at extremely close range (e.g. 1 foot from the subject). And the M6 can't do that.

A roll-back on prices???

Yes, hopefully they will cut prices like 50% soon. Then I can get that Macro-Elmarit 100mm I always wanted.

Jeremy - not necessarily as selling for less could well increase the loss if costs stay the same.More likely to put less on the shelves in the first place and not tie up money in it. After all if you are borrowing, money costs money and results in happy bankers as long as they are secured.

What kind of mark-up does Leica put on its cameras and lenses? How much can they afford to discount them without losing more money?

I would be more than happy to invest 100 euros (or even 10,000 euros) in Leica stock. The

last thing I would want to do would be to take over the company and try to run it so I

could implement my own ideas. Why? Because I don't know a damned thing about

successfully managing a camera company, that's why. What I would do is insist that Leica's

oversight board hire a competent management team and give that team the necessary

support it needs to bring the company back from the brink. If all Leica's constituencies get

is "more of the same" after the implementation of this newest plan, then everyone loses.

While it is certainly good news, it has to be taken cum granu salis (with a pinch of salt). While the formal decision about capital reduction and re-capitalization has been approved, this does not mean that the money needed for the turnaround has been found.

<br><br>

Patrick Thomas of Hermes said in an inteview after the shareholders meeting that Hermes would not participate in the recapitalization without a clear-cut and detailed strategy. "We do not yet know, we shall have to think it over".

<br><br>

Andreas Kaufmann of ACM, the second largest shareholder declared that "what we heard today is only the first part of a strategy". While he believes that Dr. Spichtig can deliver, he wants to see more details about the future strategy.

<br><br>

Source (German only) <a href=http://www.reuters.de/newsPackageArticle.jhtml?type=companiesNews&storyID=741804&section=news>Reuters</a>

What they need is to get their digital products in stores with (and I think they alluded to this) well-trained sales people to push the cameras. The M line is what it is... hasn't changed much in fifty years. Someone interested in an M Leica didn't have to be "sold" on the camera... he usually already knew what he wanted and simply shopped around (usually on the internet) for the best bargain. (Somewhat the same for the R line too, I guess.) Now, however, Leica digital cameras will go head to head with top of the line Nikons and Canons (price wise) and Leica will need to push their product better. Look for major, sexy advertising to come...

Leica has 42 million Euros in unsold cameras and lenses and binoculars. How do you turn this 42 million in products into cash (to pay salaries etc.)?

 

Well firstly, you need patience. Leica's revenues are below 100 million a year -- Leica will have to wait for FOUR YEARS to get all that stuff out the door. Obviously they won't wait that long.

 

Leica is cash starved -- it has a liquidity problem. So instead of waiting for four years to get that 42 million, they may prefer to slash prices by 50% and get 21 million within the next one year.

 

They will report lousy figures for that year due to the depreciation they'll take, but in this situation it's real cash flow that counts, real Euros in the pockets to pay the rent and creditors, not imaginary value on the books.

Ooops I made a big error there. Forget what I said.

Dennis C,

Trevor Hare has some excellent observations about Leica's competition under the "Leica General Meeting Announcement" thread.

Jeremy:

 

I don't know how accurate your figures are but your logic makes sense. Whereas I don't see as much as a 50% reduction in price, it makes sense that Leica might cut prices on current inventory to "prime the pump" insofar as cash flow is concerned.

 

Dennis

Zeos - as they are already making a loss any discounting over that already made would normally just increase the loss. You either cut costs or go for broke and hope that further discounting will increase volume and keep it increased when the prices go up again.As far as I know Nikon only make 2.5% net on camera sales.It is all a low margin business.

 

However it may be that there cash flow is so lousy that they have got to shift stock as quickly as possible to keep some money coming in.

 

Peter - I have always been confused by the attitude of Hermes and ACM.If you are that big a shareholder the company normally puts you in the picture to keep you "onside" as it were. I am afraid I have great reservations as to their motives.

Leica is saved, but it is morphing into a cross-breed between Canon and Samsung? Is it

really better?

 

Leica, the company, may be saved, for now, but Leica, the camera, is doomed.

I wouldn't assume that they are going to cut prices. In fact, I have heard the exact opposite in

the form of a subtle "you might want to buy anything you really want before midsummer"

type of hint.

would a rumour of Canon about to release a rangefinder be appreciated by Leica-folk, steeped in confidence of superior optics and mechanical robustness ... or would most acknowledge the reality and benefits of state-of-the-art engineering, and that Leica's time has come and gone?

Wandering off down the digital path never saved ANY camera company...look at Kyocera/Contax...in fact it might be the worst thing that they could do.

 

Today, Kodak announced that it was discontinuing its 'professional' digital SLRs to concentrate on something 'profitable'...namely all-auto, point and shoots for the unwashed (and barely computer literate)masses. That is where the money is!

 

Does Leica really want to make the compromises required to compete in that kind of market? The build quality would have to be lowered to keep the prices in line and then...what happens to the Leica marque?