Konica shares surge on exit from cameras and film
Friday 20 January 2006, 11:29pm EST
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By Nathan Layne
TOKYO, Jan 20 (Reuters) - Shares of Konica Minolta Holdings (4902.T: Quote, Profile, Research) surged as much as 10 percent on Friday after the company said it would exit the camera and photo film markets, where it has been losing money amid stiff competition and weak demand.
The news also boosted shares of Fuji Photo Film Co. (4901.T: Quote, Profile, Research), which stands to benefit as it will have one less competitor in the film industry, and Sony Corp. (6758.T: Quote, Profile, Research), which plans to take over Konica's digital single lens reflex (SLR) camera business.
Konica Minolta, the world's third-largest maker of photo film after Eastman Kodak (EK.N: Quote, Profile, Research) and Fuji, had said in November it would significantly reduce operations, but the decision to completely shut them down caught the market by surprise.
Shares of Konica Minolta closed the morning session up 5.4 percent at 1,347 yen after hitting a 14-month high of 1,410 yen in early trade, up 10.3 percent on the day. The benchmark Nikkei average <.N225> was 0.61 percent higher by the midday break.
"The stock is reacting to the fact that they are exiting a very competitive area where it is suffering ... they've done the right thing," said Marc Desmidt, head of the Japanese large-cap equity team at Merrill Lynch Investment Managers.
But Desmidt said he does not hold Konica shares and was not looking to buy them on the news. Konica Minolta still faces tough competition in the office equipment market with players such as Canon Inc. (7751.T: Quote, Profile, Research) and Ricoh Co. Ltd. (7752.T: Quote, Profile, Research), he said.
"We just think this whole area is extraordinarily competitive and very tough for companies. But we might want to take another look at Fuji Photo Film," Desmidt said, noting the possibility Fuji might follow with restructuring moves of its own.
Fuji Photo's stock gained 2.37 percent on expectations it could capitalise on the exit of Konica Minolta, which will leave the camera film industry with only two major players in a market expected to shrink 25 percent in the business year to March.
Konica Minolta estimates its share of the global film market at just under 20 percent. Fuji Photo sees its share at 35 percent, while Kodak, which has been downsizing its film operations, is thought to control about 45 percent.
Konica Minolta had said in November it would post a group net loss of 47 billion yen ($406.8 million) this business year as it took a charge of 90 billion yen to rationalise production, write down assets and cut jobs in its camera and film division.
Some analysts said the move by Konica Minolta would help accelerate a shift of resources to more promising areas such as colour office copiers and liquid crystal display materials, and brightened the earnings outlook for the next business year.
"The lack of disclosure concerning details of the restructuring had made the outlook for the (year to March, 2007) very uncertain, causing many investors to shun the stock," said Credit Suisse analyst Kunihiko Kanno in a note.
Kanno also applauded news that President Fumio Iwai would be replaced by Yoshikatsu Ota, a vice president who was formerly president of Minolta, as a sign that the integration of Minolta and Konica, which merged in 2003, was all but complete.
Shares of Sony, meanwhile, gained 3.06 percent to 5,050 yen, as some analysts said its purchase of Konica Minolta's digital SLR business would allow it to gain traction in the fast-growing and most profitable segment of the digital camera market.
Sony and Konica Minolta formed an agreement in July to jointly develop digital SLR cameras, which are generally more expensive and offer better performance than point-and-shoot compact models, and typically use interchangeable lenses.
Konica Minolta also said it would stop production of mini-labs, machines installed in photo shops and retailers for developing and printing photos, and consign maintenance and service to rival Noritsu Koki Co. (7744.T: Quote, Profile, Research).
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