Walter Stephan wrote:
Nice to hear from a normally quiet member!
> It does seem to me that oly is trying desperately to dispose of remaining e-1
> stock.
Without inside info, it's just impossible to tell. It could just as
easily be that they are eager to keep increasing the number of bodies
out there that their lenses can be sold for.
> Does this mean that they are planning to announce a new pro-level
> body (say in the fall),
That's the vague consensus rumor.
> or are they just trying to cut their losses?
>
Again, only uninformed speculation is possible. Anyone who has done work
on product costs knows that this is a complex area. A considerable
amount of the total cost of production of high tech items is often fixed
costs of R&D, tooling, etc. How a company accounts for these can vary
considerably. The marginal cost of producing one more item, without any
share of the up front costs may be a great deal less than the average cost.
While it is clear that many of the Oly non DSLR digicams are produced in
one production run and then simply sold until they run out, with
appropriate discounts near the end of the sales of slower sellers, it
seems unlikely that is the case with the E-1. To have produced the
number that have been sold and still seem to be in the pipeline all in
one run a few years ago would have been astonishingly risky for a modest
size company. More likely, there have been at least two runs. Probably,
the production line has been and will be maintained until the next
single digit E series body is ready for production. It is also not
unlikely that the cost of key components like the sensor have dropped in
the meantime.
A simple example may make the issues clear. Assume MY Corp spends 10
million on up front costs to produce a run of 1 million gonzos and that
actual direct labor, materials, etc. costs are also 10 million. The cost
per gonzo is then 20. If it then turns out that demand is higher than
anticipated, they make a second run of 2 million gonzos. First, the
original fixed costs have already been written off. Second, there will
likely be economies of scale in the second run. So the cost per gonzo of
the second run may be 9.
Then, during the second run, they decide to add 20% to the run, based on
sales volume and delays in the planned introduction of the Gonzo II. The
marginal costs of the last 400,000 units may easily turn out to be 6 or
7. In some sorts of items, this may go even lower.
I know nothing at all about Oly's accounting or production details. I
only point out that the kind of scenario I painted is quite common in
industrial manufacturing. Of course, Oly may be losing money on current
E-1 prices, but they may also be making as much profit per unit as on
the original ones, possibly even more. We just can't know.
Also, as alluded to above, every additional 4/3 mount out there is
potential sales for lenses. And margins on lenses, particularly the non
kit variety and extra particularly the pro ones are higher than on bodies.
Moose
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