Sony is expected to approve a plan to invest around $643 million (50 billion yen) in Olympus. As the Japanese manufacturer of cameras, optics and reprography products is currently facing a trial for having hidden investment losses for the past 20 years, it has been looking for a potential investor for months. By injecting that capital investment, Sony will become the largest shareholder.
After rumors of a Panasonic investment in June, Reuters confirmed from three different sources that Sony and Olympus are ready to announce an investment that would represent 10 percent of the capital.
Olympus reported a net loss of $630 million (49 billion yen) for the last fiscal year, mainly due to wrong financial decisions and the repercussions of the past scandalous affaire. Today, the company and three former high ranked executives pleaded guilty. Over a couple of decades, around $1.7 billion of losses were faked.
Olympus announced in June that it would cut 2,700 jobs and scrap 40 percent of its factories in order to reduce cost. Last quarter, the company reported a 60 percent drop in operating profit.
With that investment, Sony will become the largest shareholder and the two companies will create a new business unit focused on medical equipment. As a brand new market for Sony, it is a way to diversify its revenue.
Yet, last quarter, despite $19.2 billion in sales, Sony’s profit was down 77 percent. Standard & Poor’s downgraded Sony as well, which could make investment more difficult in the future.
As Vic Gundotra said in another situation, “two turkeys do not make an eagle.” When it comes to Japanese investments, they are often hard to understand for a foreigner. Two companies following a downward trend won’t find an easy solution by partnering. It remains to be seen if they can now focus on producing innovative new products.
