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What scandal? This time last year it was possible that Olympus, reeling from one of Japan's biggest accounting frauds, could be broken up or forced into change by outside shareholders. Either option would have been a radical outcome for blue-chip Japan. But the opportunity passed as the company's bankers triumphed and it won support from peers, including ¥50-billion ($537-million) for a minority stake from Sony. Business has continued as usual, with good units covering bad ones. Would a breakup have been so terrible?
Simplified, Olympus is a tale of two businesses: the very good medical equipment division, and the rest, including cameras. Buying Olympus means getting a company where the ¥56-billion of operating profits from medical equipment so far this financial year (which ends in March) are more than twice those of the overall business. Losses in its camera business doubled, too.
Of course, Olympus has a plan. What ailing Japanese technology company does not? But along with "personnel optimization" and other cost cutting, the plan is still centred on cameras and life sciences (microscopes and the like) as well as medical equipment. The three businesses can in theory be complementary. But financially, all the giving is being done by only one of the three, with little sign that the other units can really pull their weight. The camera division's lower-end products are being hurt by smartphones, while the high-end business, dominated by the likes of Nikon, is suffering a sharp drop in pricing power.
Over the past 10 years, Olympus would have earned a quarter again as much operating profit had it just sold medical equipment. Now it is trading at 0.75 times sales, half the level of rival Boston Scientific. But with no breakup in sight, there is little chance of investors realizing the company's true worth and far more they will continue propping up poor businesses.