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2) Leica doesn't need to or intend to make a profit on the S2 in 2009
I take this as meaning two things. First, Leica has invested many millions of Euros into making the S2 a market leader and bringing all development in house. Second, Leica is interested in market share first and profitability second. The pricing strategy might be very aggressive.
What it means is that Leica is banking on new product, specifically the M8.2, Lux 4, and lenses, to generate the revenue it needs to sustain its plan. If those products do not bring in the revenue Leica projected as far back as a year ago, Leica may find itself looking for recapitalization it had not intended.
3) Leica is in this for the long term (they are looking 5-10 years in the future)
Kaufmann is building two new factories, one in Portugal and the other in Wetzlar. He intends to grow the company and continue investing in R&D, regardless of the immediate economic climate. This is good for progress. The S-System will serve as the flagship product for at least the next five years. He even mentioned that they have already taken trademarks on S3, S4, and S5. Leica may well be one of the only companies that is hiring new talent and expanding while the rest of the world is focused on scaling back and laying off. In fact, according to their last financial report, they have about 100 more employees now than they did a year ago, adding about 10% to its workforce, mostly in R&D.
Several things:
- my understanding (possibly incorrect?) is the two factories are refurbs/expansions of existing Leica factories. Who cares.
- Leica did indeed hire 100 or so new employees -- just after it reorganized into a new company allowing it to sidestep mandatory contributions to employee pension funding. Fiscally healthy companies don't do that. GM, Ford, Chrysler are all going through that same pension fund blues wiggle right now.
- there is no indication where those new hires are working. Leica does have new people in key, top management positions. Leica also has indicated it seriously underestimated the necessary R&D resources to meet product introduction deadlines, and that underestimation hurt projected sales, and not by an insignificant amount.
- Leica is running in the red -- seriously in the red. May not be an issue if they were well capitalized going into the S2 development. It will be an issue in the near future. Leica has planned to be at break even by FY09/10. Problem: Nikon has recently revised sales projections for cameras and lens, lowering sales by 68%-78%. Leica derives the lion's share of its revenue from camera/lens and sports optic sales. Compared to the Japanese camera moguls, Leica is a boutique camera outfilt that cannot sustain a loss of revenue like the big guys can.
But regardless of rumors of Leica's demise, crisis, etc., they are in fact moving full speed ahead with the S2 and the R10.
Yeah, but are they in panic mode doing it? Where are they cutting corners? I would be afraid of new product released behind schedule from any company on the edge. The DeLorean sports car comes to mind.
I don't know anything about Leica's demise but there is nothing available to indicate the company is fiscally healthy. On the contrary, every indication is that it is an extremely vulnerable company right now. That with no regard to how well capitalized Leica may actually be.
Leica's numbers indicate they can carry product that already has market momentum. Unless they have some serous cash somewhere, I don't see how they can provide for a full launch of a new product line. Given the condition of European banks and the vulnerability of consumer optics sales, me thinks a bailout could be iffy. I would feel a whole lot better about their increase in employee numbers if they/Leica was also able to fund their employee pensions.
