On 8/15/2012 4:18 PM, Joel Wilcox wrote:
> On Wed, Aug 15, 2012, at 05:41 PM, Moose wrote:
>> I've given my B-school/Econ lecture on marginal profit on manufactured
>> goods here before. ...
> How many SHG lenses did they make?
>
> If they had more than they could sell at the prices they wanted them to
> command, what possible good is there in leaving them in a warehouse?
> Why wouldn't Olympusamerica or Cameta be selling them on eBay as refurbs
> or whatever?
See, you are using ordinary logic, not financial/business accounting logic.
When you close out inventory that has not
already been written down on the books, you show a loss. As long as it sits in
a warehouse, in inventory at full value,
your books don't show a loss.
This is one of probably countless ways that a public corporation may smooth out
variations in reported profits. The
market tends to punish the stock value of companies with 'wild' variations in
earnings. If you don't show at least
moderate, steady gains, they go cold on you. If you have a great quarter or
two, they expect you to keep it up. It's
largely no win.
Soooo, you manage the things you can. If you've got a bunch of stuff that needs
to be written down, you never do that
when earnings are level or, God forbid, down. Unless there is some sort of
understandable disaster, then you bury the
old losses in the flood of red ink. Tsunamis, hurricanes, tornadoes, floods,
and so on, have provided cover for
uncounted billions of hidden losses.
But you do want some earnings reducing stuff in your back pocket, to tone down
a particularly good period.
Understand, none of this has anything to do with actual cash flow. That's
another whole area of accounting. Very
important, indeed, but only notionally related to reported earnings in many
cases. Got great earnings, but not enough
cash to pay suppliers? Oooops!
How do I know? I for many years did end of year cash needs projections for a
very large real estate and construction
program. A newish boss thought I was doing it wrong, took it over from me, made
a terrible, very expensive mess of it
and, finally, got himself canned.
> Are these ideas based on any facts, or are they simply derived from your
> assumption that the e-system was a failure?
Be assured, there are no reliable facts available outside Oly, possible not
inside. I do not think the E-system is a
failure, but the answer depends a lot on definitions.
From a user standpoint, they sold a lot of cameras to a lot of people, most of
whom, it appears, liked them.
From a business standpoint, return on investment, I suspect it has been
somewhere between moderate success and moderate
failure. If you sell 8 billion thingies, and everybody loves them and you, and
you lose a dollar on the whole thing, it
was a financial failure.
If you spend 100 million on stuff and related acquisition and backstage costs,
and sell it for 400 million, it's crap,
and it costs you 100 million to fix the mess, you still made a 100% return on
investment, and it was financially great
business. If you did the whole thing on 10 million of your own money, the rest
leveraged, you have a stupendous ROI,
sell the whole thing based on the terrific short term financials, by a tropical
island and retire in style. :-)
I do suspect that the 'pro' end of the 4/3 business has not been successful.
They spent a lot making serious, pro
quality lenses and bodies, without the IQ chops in the sensor system needed to
actually get any traction in the pro markets.
If that happens, and sales are short of projections, inventory piles up. The
reason I suspect Oly has left it in
warehouses is history. Japanese companies, more even than many others, change
culture and practices very slowly, short
of disaster, and that's what they did with the last of the OM line. They were
selling new OM-4Tis, 3Tis and lenses for
many years after production had ceased.
> Maybe I missed something in the company's financial scandal that plays into
> this.
It means a couple of things.
No one, except possibly for a couple of people buried deep in Oly, will ever
know how much money the 4/3 system like
made or lost. Financial chaos is the time when everything anybody want's to
hide becomes impenetrable. Things like
excess inventory get quietly written down.
The future of the camera division may well depend on the OM-D line. All the
R&D, tooling, etc. got done before and/or in
spite of all the other chaos. If it goes on to be a financial success, the team
that created it will be held in high
esteem, and probably be allowed to continue development, even if banks take
over.
> Joel (always fell asleep in econ lectures) W.
Got a degree in Econ, long, long ago, know very little as a result.
Worked in the headquarters of a huge manufacturing, distribution and retail
business for 31 years, know quite a lot as a
result.
Financial Moose?
--
What if the Hokey Pokey *IS* what it's all about?
--
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