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Nice article from the New York Times about the Olympus saga.


Today Olympus made his biggest share value gain since 1973! After Mr. Kikuawa resign the shares went up by 23%! Some readers asked me to highlight an argument in defense of Olympus: Not all $687 million fees where paid cash! The sum includes a $443 million buyback of preferred shares.

And there is one more article you have to read. It explains the difference and clash between two different mindsets, the western philosophy from Woodford versus the traditional way of doing business from Kikukawa. You can read it here: (Thanks Thomas for sending me this).

P.S.: I am a big fan of Olympus company and history. And I truly wish that story can soon be over. I want to talk about future cameras again :)

  • Pete


  • GreyOwl

    :-) :-)

  • Joe

    Dammit, my broker advised agasinst purchase. 23%. Ahhhh!

    • sacundim

      Your broker is right to be prudent. The stock has dropped over 50% over the course of a week or so. It needs to go up more than 100% from the bottom to recover. If you’d jumped in to buy after the initial fall, you might still not be whole—and it may well drop again if new negative facts come to light.

      It’s one thing to invest on a stock that’s falling because of overly negative public opinion, but whose business is run honestly. It is another thing to invest on a stock that has fallen dramatically because the management and the board might be defrauding investors. In the first case at least you can be confident that the management is trying to make a buck for you. In the second case, the management may be trying to steal your buck.

    • flash

      Just don’t invest the kids milk money, or the rent money. The price will be speculative due to all the short selling and options arrangements. Eventually, the cool cold fundamentals should come to play. Olympus does have cash and good line of credit. So they can ride out the market, unless the shareholders get to antsy.

      • sacundim

        “Eventually, the cool cold fundamentals should come to play. Olympus does have cash and good line of credit. So they can ride out the market, unless the shareholders get to antsy.”

        You know, if the trustworthiness of the management is under question, the reliability of the information the company provides about its fundamentals must also come under question. If management is dishonest enough to steal 1.2B from the company, what makes you think that they’re being honest about the financials?

        At the very minimum, I’d say don’t put any money into Olympus without having a good answer to that question.

  • sacundim

    “Some readers asked me to highlight an argument in defense of Olympus: Not all $687 million fees where paid cash! The sum includes a $443 million buyback of preferred shares.”

    Somebody doesn’t understand what a “buyback” is.

  • How is paying US$443 in cash to buy back preferred shares different than paying in cash? ;~)

    In terms of the AXAM deal, even the original cash payments were out of line with what’s considered normal for that size deal. The issuance of preferred shares in addition is unprecedented, I believe. The buyback of those same shares at a later date at a higher value raises further eyebrows.

    Be careful of reading too much into the rise in Olympus stock (though I guess I get to say “I told you so” to a doubter on a previous thread ;~). Beyond the fact that there were a lot of big gains on the Nikkei today, there’s the chance that Kikukawa’s resignation actually means there’s a backroom deal brewing or there’s a backroom agreement with certain investors to perform certain due diligence to clear the mess by Takayama. That’s all we need, insider trading on top of all that’s happened so far.

  • DMA

    I just hope that this entire affair means that Olympus as an entity gets rid of the dead wood which has clearly begun to effect both it’s product range as well as its R & D. As a proud owner of the E-5, with their SWD series lenses, I’m not too keen of Olympus’ abandonment of their traditional SLR range. Given the type of photography that I do, I NEED an SLR type system.

    So here’s hoping, with new fresh leadership, Olympus get back to the leading edge of camera development wherein I’d like to see an E-6xx, E-3x, & an E-7 sometime soon. And SLRs not just filled with tech crammed in from their micro 4/3 system, but true revoluntionary stuff which we all know Olympus can produce.

    • Esa Tuunanen

      Analog mechanical design of SLR is more like blunt mallet than any edge because those analog mechanical parts have very limited advance chances while digital electronics goes forward at the speed of semiconductor industry.
      That’s why Sony wants to get rid of those components in their system cameras.
      And that’s where leading edge of cameras will be more than ever in near future and where goal of Olympus should be in their system cameras for as much as technology allows.
      Sony is pushing EVF forward in performance and Nikon even has in sensor PDAF for full AF compatibility (using only dumb adapter) with their SLR lenses so technology is almost here for fully replacing SLR concept in most uses.

      But this current idiotic trend that mirrorless must mean only tiny toys and fashion needs to be corrected. Camera is tool and hence its design must follow maximizing ergonomy and functionality:
      DSLRs don’t have that big grip because bigger would be more professional but for getting comfortable and especially secure and solid grip without spending thought on it. (you just grab high end DLSR into your hand)
      Size of hand and fingers is also limiting factor for user interface so besides being better in balance with lenses camera needs to be big enough for housing all controls so that they don’t interfere with keeping camera in hand.
      Also settings you need to change in the field commonly (like all drive mode and their submode settings) should be accessible inside second without going through any kind menus meaning either dedicated buttons of higher end DSLRs or system like in (Konica)Minolta A1/A2.

      • DMA

        Oh I missed this. Sorry. You know if I had a dollar for everytime I heard the phrase the “technology is almost here” in photography I would be a multi-millionare by now. I have 30 years experience in SLR, whether it be film or digital, & I am yet to see a superior system especially given what I do now. I am thus far from convinced that a mirrorless system will ever equal, let alone surpass, a high-end SLR in respect to what I need.

        Furthermore the current Olympus attitude ignores the fact that many of us still want a SLR syetem! For example, I don’t want EVF when my eyes are perfectly fine & an optical system (old fashioned as it may seem to some) is superior regardless. Similarly I don’t want to have to have a degree in computer science in order to take a photo.

        Now call me ancient, but Canon seems to agree with me! Considering all my film SLR experience is with Canon, & given what you’ve said above, whilst it is apparently also the future for 4/3rds, then I’ll dump Olympus & go back to Canon, even though I firmly believe that the Zuiko lenses are superior to anything Canon can produce. Nonetheless, in 6 months time, a whole lot of 1d MkIV’s are going to be cheap thanks to the new Canon 1dx. Talk about a bargan as the 1d MkIV is superior to the E-5 which I currently use.

        I will sincerely miss the “analogue” abilities of the Olympus system, afterall it is a system at the end of the day, but if there is no SLR future for it, then a lot of people, who demand such an SLR system, will abandon Olympus as a result if they haven’t done so already. Not only is it idiotic marketing, but, as Canon & Nikon continue to demonstrate, there still a large future for the SLR market, whilst this “ancient” techology can still be greatly improved IMHO.

  • Olympius

    While it’s good that Kikukawa finally stepped down, I agree with Woodford that the whole board needs to be replaced. Doubt that can happen, but if there’s enough of a shareholder revolt, anything’s possible.

    But the matter of these payments to AXAM/AXES, and the stupid acquisitions still needs to be dealt with. I wonder what, if anything, Takayama will do about it.

    – Olympius

  • che

    I told you to buy some shares. If i had some cash i would but i didnt :-/

    • Sho-Bud

      I think Woodford should be kicked out. He’s a criminal. In my country, it is criminal that when you have knowledge of a crime, you don’t report it to the police.
      Mr. Woodford had knowledge of what he thinks was a crime and didn’t report it. That is crime 1.
      Than he tried to blackmail the board of Olympus, which he clearly states in the letter he published. Crime no. 2. Take a walk and let me take over control and I won’t publish this report, or else….
      Do you really think Mr. Woodford cares about the 1.5 billion the shareholders miss out on??? No way, if he had it his way he would now be in control of Olympus and no-one would ever know. I think it tells a lot about mr. Woodford’s ethics…..

      • Iiee

        Seriously? All he found were a series of incredibly bad deals by a company in one of the murkiest Corporate cultures in the world. All the way through this it has been clear that no one is going to be able to prove that there was any criminality in this without turning the whole company and board upside down. He found a stunning lack of due diligence and did what any western executive/director would do and asked for the resignation of those responsible. Sure the PWC report is damming but it makes no mention of outright criminality (though it is suggested the books might have been a little cooked) so he was under no obligation to report the matter to the police. When they fired him for investigating it he had both evidence that they were not acting in the companies best interests and where attempting to mask a series of suspect transactions. He then reported the matter to the authorities and the media. You would seriously condemn the whistle-blower for trying to adhere to the very corporate governance practices that would have prevented this mess in the first place?

      • Woodford has repeatedly said he has no knowledge of a crime. What he has knowledge of is a lot of very questionable payments that no one will tell him what they were about or for. “Hello, police? My boss won’t tell me what he did. Will you arrest him for me?”

        Woodford did what anyone else in his position would have: get a neutral third party to investigate and report on the matter. He took that report and tried to get his boss and board to open up about what happened. Remember, he’s now CEO and has to certify company financial results, and remnants of these deals are STILL on Olympus’ books and causing operational losses. They shut him out and eventually fired him. Not a single bit of any of that is criminal.

        However, there MAY be criminal intent or commission behind the things that caused Kikukawa and the board to approve those deals in the first place. Problem is, no one knows if there is or there isn’t. As I’ve written many times now, it could just as easily be out and out incompetence that caused the problems. “Hello, police? My boss and board are incompetent. Will you arrest them for me?”

        Meanwhile, YOU have accused Woodford of criminal activity. Did you go to the police? Oops, in your country you’ve just committed a criminal act yourself. Now what are you going to do?

  • Tulio

    It is not a west / Japan problem. Olympus just happened to be infiltrated by members of the organized crime:

    • Olympius

      Oh great, tremendous circumstancial evidence that Olympus has been inflitrated by the Yakuza and they are bleeding them dry. That would explain a few of the bizzare things happening at that company in the past few years. What a mess this is.

      – Olympius

      • flash

        If this was in fact the case I am confused because if it happen where I was from originally, the only place I personally know about the “unsocial elements” :

        1. There would of been two fellows that went to diner and did not want any marinara sauce served at their table or the ones next to it, seriously. If this was even hinted at being made public like this.

        2. If there was so much involved a clean Woodford would not have been appointed anywhere near corporate or even a director of the board which he was already.

        3. It would not be only investigated by just the Serious Fraud Unit in the UK. I have liked the serious fraud unit work in the past.

        4. They would of screened Woodfords promotion, and stopped it if for no other reason just because he described himself as a loud mouth. You need someone who has control of his or her faculties in a position of leadership, they know that (Olympus did not). Also a basic level of competence, not a fashion statement promotion.

        5. There would of not been M&A involving companies on 3 different continents. Local control by trusted family members and friends is very important to them. Why have a UK, Japan, and now it seems a very recent US acquisition in question. The US acquisition is beginning to be shown as the worst in how it was done happen this summer.

        6. Olympus would for example get better sensors they wanted at a good price :). Seriously, the corporation might have been run better and certainly got the anything they wanted in way of available supplies.

        Maybe the Yakuza are a bunch of wimps that are stupid (compared to the locals), Naa I know that is not right. Most of the, unsocial people leadership I have met personally (when I worked with the authorities, I don’t hang out with the unsocial elements) were very bright, and could of made the same or more money by truly being legit. Not at all like the TV stereotype, I’m closer to the stereotype then they were. When I say bright they had an active and creative minds, no morals though. Very interesting to talk to about other issue, like photography, had some pictures in my office talked about F stops, dept of field, getting the right light in natural water. Yakuza, has the reputation of being ruthless so a heart-attack or drug overdose would of happen in August if they were involved to the extent everyone gives them credit for. Maybe there is involvement of Yakuza in Olympus, but it does not seem to be what is alleged, someone has to take out the garbage. I do not like M$A in general, in most cases does not “bring value to the company and most always to the world in general, but in the case of the Gyrus it might of been. There have been a lot of bigger write offs then Olympus did with its stupid purchases, I remember one that stopped at the 11th hour, in which the Officers of a very large corporation were very disappointed and the next year the potential acquisition faced incredible legal and financial problems that might of destroyed the company if the acquisition took place. For companies that sell cameras look at some of the near total write offs Sony has made in the last decade. The river get wider not deeper so to speak; and the company looses its direction.

        “Small is Beautiful”, anyone read that book (required reading when I was a freshman in college)? Should be again today.

        • Boooo!

          “of” does not equal “have”

        • All of the revelations so far all point to self-interest dealing. We just got a new Reuters article revealing more about the microwave rice bowl acquisition: there’s a serious question of whether the “adviser” hired by Olympus had self interest, since he appears to hold patents in the company he advised Olympus to acquire.

          The question that you should be asking is this: where did all this self-interest acquisition stuff come from? It does not appear that Olympus management was benefiting. Nor is Olympus benefiting. Just the opposite. The company in question I just mentioned lost billions of yen this year on hundreds of millions in sales, so it is still a drain on the company (which is why Woodford had problems with it). The logical answers to the question are still the two I pointed out before: incompetence and criminality. One (incompetence) is an internal problem, the other (criminality) is an external problem with a clear issue of why the internal management allowed it.

          In the case of incompetence, we still have Mori and Takayama, board members who approved all these dealings, in charge. Yesterday’s press conference in Japan was interesting. The Japanese press is slowly getting cajones. Much like they started taking on TEPCO after the quake disaster, they appear to be asking tough questions of Olympus, but Olympus simply won’t answer them.

          In the case of criminality, there’s been no clear link to yakuza that I’ve seen. No one has been able to trace things to someone with known yakuza ties. The bad news for Olympus, though, is that the press continues to slowly unwind names involved behind the deals, so if there is a tie, it will eventually show up. The reason why yakuza keeps getting mentioned is the pattern that Olympus followed: it’s textbook in Japan, right down to the waste disposal company acquisition. Woodford’s security concern is another clue; he’s not afraid of Kikukawa or any of the Olympus management coming after him, nor is he afraid of bankers involved in deals.

          If I were in Olympus upper management right now I’d be afraid that Woodford actually knew what the tie was between Olympus and criminal elements, and that he’s now revealed that to investigating agencies. If so, it will come out, and we’re going to have more dynamite going off in Olympus HQ.

          As for Olympus’ acquisitions being like Sony’s, you’re missing a key point: Olympus never tried to bring those acquisitions outside of Gyrus into the company’s folds. Just the opposite: they cast them aside far away from Olympus HQ. There was never any real attempt to integrate them. This implies that there was never any real intent to get into those businesses. Put them in some outlying building where no one sees them, let them die natural deaths, and be done with them. Only one problem: the numbers are too big, so they end up on your financials where people see them and ask questions. Then Woodford comes along and tries to get rid of them. (One has to ask oneself if that was Kikukawa’s intent in appointing Woodford: as a cost-cutter he’d see those things didn’t belong and close them down, thus putting an end to the problem. Only one problem: Woodford actually was following fiduciary duties here, and part of the problem was the board that allowed those problems to enter the building in the first place.)

      • CKDexterHaven

        All you Olympus apologists and delusionists MUST read the linked article above–it makes it pretty clear that Olympus was being bled dry by organized crime.

    • Sho-Bud

      Woodword stated in his letter that he wouldn’t publish his information if the board would resign, in that case he would have kept his mouth shut. That’s my problem with the situation.

  • Olymp

    “I truly wish that story can soon be over. I want to talk about future cameras again”
    Then stick your head in the sand, stop talking about this, pretend you have no idea of what organised crime, yakuza or corruption means, and leave that matter to grown-up.

    I like your website, but this sentence is so… lets say “naive” of you, otherwise I might be unpleasant.

  • > Not all $687 million fees where paid cash! The sum includes a $443 million buyback of preferred shares.

    What’s new? This was part of the original account on Bloomberg/etc.

    I have missed the bit that those were *preferred* stocks, what makes the deal even worse for Olympus.

    Anyway you spin it, Olympus became poorer by a big buck. After all, somehow Olympus should have come into ownership of those preferred stocks, e.g. via buy-back action normally authorized by board or stockholders.

    > And there is one more article you have to read.

    My mind isn’t clear enough at the moment to extract more than “Do NEVER buy stocks of Japanese companies!!!”

    It is hard for me to see that as a clash of cultures. To my (poor) understanding of the Asian moral and culture, behavior of MR.W (his disclosures about company) is not that far from behavior of board (which has fired him). In fact, IMO the latter is worse than the former. And the latter has happened first. So IMO MR.W is in right – Oly’s in wrong.

    • flash

      I would not buy Japanese stock directly, unless it was also listed on one of the large exchanges in your country.

      I have followed the medical segment in the past and Olympus seemed to be over valued IMHO. Being the market leader in its segment lets Olympus really pull in the yen, but as they are such a small company they seem to be petrified of being taken over. So they keep borrowing and trying to grow in other areas at all cost. Other then Gyrus (strangely enough) most of their acquisitions were odd, even the one in which Woodford came over from. Most of the time they themselves could of grown in those markets, or even developed new markets like they did in their almost 100 years; of course what was happening in japan in the last decade or so they probably were right and would of been acquired. Public companies have a real downside in which way the market seems to be working now.

      Woodford would of been let go from a number of western companies sooner then Olympus got rid of him. He was glorified salesman and hatchet man, a poor leader. Not saying a leader does not need to be a salesman or a hatchet man on occasion.

      The financial market liked him, because they viewed him as a westerner who would make cuts in the company and pay more attention to ROI. This even appears false judging by the first quarter statement, will wait to seen the next quarter statement. Not to mention it does not work in a ultra high tech. company like Olympus (that medical and industrial stuff is truly amazing some went in me this week).

      It is interesting that he says the whole board is toxic when he in fact was on the board when these acquisitions took place. Probably, is just really mad they all let him go. Now, that he is gone and the old chairman; Olympus has a opportunity in a very short window of time to turn this around.

  • The more I read on this story, the more admiration I have for this supposedly “weasel” Woodward. If this plays out the way I think it did, i.e Olympus was involved in a terrible financial fraud and woodward was elevated to CEO position to just shut him up, the man has grown in my estimation a great CEO, despite the fact he has was CEO for just 2 weeks! No fance MBA, no finance degree, no management experience in running a multinational corporation, but hey he sure knows how to sleep in the night, eh?

  • calxn

    Sounds like Japan still has not changed. It’s not that far off from the way business is done in China… secretly and behind close doors.

    The revelation of criminal gang involvement is VERY damaging. Are the Japanese a bunch of spineless yes man, too afraid of cleaning up the underworld? Nearly $700mil? ARe you kidding me? The Yakuzas must live like kings.

  • Alexander

    Yes new Olympus Pen Pro with the same features like the NEX 7 & GPS ! :-)

  • Pixnat

    Never forget that Olympus, Panasonic, Canon, Nikon,… are JAPANESE companies, and that Japan has a very specific Culture. Trying to inject Anglo-Saxon practices in Japan could lead to big clashes. The proof is there. Some people are slowly forgetting the word “DIVERSITY” those days… But the reality is, despite what some people think, that we do not live in a Global World, but in a Glocal World.

    • nicwalmsley

      What a joke. You think organised crime infiltrating big business, mindless subservience to authority, and a fear of being a trouble maker are unique to Japan. Well they are not. Those things happen all over the world, in all cultures, including the UK and USA.

      Maybe some countries have tried harder to clean it up?

      • Pixnat

        Of course it happens in every country! The difference is how it is culturaly percieved and how each country try to clean it up. And there are BIG difference, you bet!

  • Don Carrot

    “with the same features like the NEX 7”

    they used to innovate, now they are just playing catch-me-if-you-can with sony

    maitani-san spirit is gone, what a shame

  • tmrgrs

    I just hope that Olympus’ imaging division can survive intact after all of this controversy has been resolved. As a PEN user, that’s about all that really matters to me. Corporate boardrooms are often little more than a rat’s nest of unscrupulous thieves IMO and it’s too bad that employees and customers have to suffer the consequences of their financial misadventures.

    • MichaelKJ

      I think almost all of would like to see Oly’s cameras survive (although I doubt anyone would mind the elimination of Oly P&Ss–with the exception of the XZ-1).
      I think it will be very difficult for Oly to continue funding mFT R&D for the time being with the company in disarray.

    • Will

      Some company will buy that unit when Olympus goes under.

  • MichaelKJ

    Stock price fell 10% after one day increase. This suggests that the uptick was due to factors such as short sellers closing out their positions and not due to increased confidence in Oly.

    Article in today’s NYTimes notes that both the FBI and SEC are actively investigating Olympus.

    “The Federal Bureau of Investigation opened the case only two weeks ago, but the inquiry has now grown to touch nearly every corner of the federal law enforcement arsenal. Federal prosecutors in Manhattan have jumped on the case, while the S.E.C. has begun an examination of the now-defunct brokerage firm, Axes America.

    An S.E.C. spokesman declined to comment.

    While the focus of the investigation is not yet clear, securities lawyers speculate that investigators will potentially examine whether the steep fees were kickbacks to Olympus officials involved in the deal. So far, it is believed that federal authorities are possibly interested in whether the fees amounted to money laundering or other illicit acts.”

  • Simon

    Did Mr. Woodford buy Olympus shares after he knocked down the share value? I wouldn’t be surprised…

    • MichaelKJ

      He knows that he could go to jail for either selling his stock right before he went public or buying after shares declined. Most CEOs have stock options with restrictions on when they can buy and sell (at least in the US), so it is possible that Woodford has lost a lot of money since he blew the whistle. It is interesting that no one has inquired about how many shares he owns.

  • TU

    Tell the arsehole Englishman to go home. The world is sick and tired of the English thinking they can still boss the world around. Not any more! The Empire is finished. Get over it. Have some respect, for crying out loud, you conceited, condescending dogs from England!

    • tmrgrs

      This has got to be one of the most blatant displays of stupidity that I’ve seen posted here in some time. And BTW, I’m not a Brit.

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