Nov 19, 2019
Olympus May Cut Jobs in Aggressive Push to Increase Margins
(Bloomberg) -- Olympus Corp. is considering job cuts as the medical device and camera maker pushes forward with plans to almost double operating margin in the medium term, Chief Executive Officer Yasuo Takeuchi said.
“The issue of personnel will naturally need to be addressed,” Takeuchi, who was promoted from chief financial officer in April, told reporters in Tokyo on Tuesday. “It’s a strategy to improve performance, and something that will come about in due course.”
The manufacturer of cameras and endoscopes has been implementing restructuring measures since U.S. hedge fund ValueAct Capital Management, which owns 5% of Olympus, added two directors to the board earlier this year. The move was viewed as a rare victory for activist investors in a market historically resistant to investor demands. Investor sentiment has been high, with the shares doubling this year.
Takeuchi also backtracked on some of his comments in the past that the camera business was not for sale, saying that may not be the case anymore. The imaging unit, which makes up 6% of sales, is the lowest margin and lowest growth businesses in Olympus’s portfolio, according to past company presentations. Olympus is working to stabilize the imaging business by focusing on its main markets, a spokeswoman said.
The CEO presented a new medium-term plan earlier this month calling for an operating margin of more than 20% for the fiscal year ending March 2023, up from about 11% seen for the current period. Olympus also said it plans to regularly reassess its business portfolio to focus on its medical business.
Olympus, which controls more than 70% of the global market for endoscopes, is also facing challenges to its dominance from Fujifilm Holdings Corp., Boston Scientific Corp. and other competitors.
Asked about analysts’ skepticism over the lack of details in his plan, Takeuchi said it was his role to set the direction of the company, and he wanted to take a bottom-up approach to reaching those goals.
ValueAct’s push to add outside board members has brought a diversity of opinion to discussions of the company’s future, Takeuchi said, adding that the government’s push for corporate governance reform has been good for corporate Japan.
Even so, Olympus’s public image has also been under pressure after an in-house lawyer raised questions about its financial practices last year, and its U.S. unit and a former senior executive in Japan pleaded guilty to failing to file required adverse event reports for infections connected to duodenoscopes. Olympus is also still wrestling with the fallout from its 2011 accounting scandal.
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