As we know, the shift from film-based photography to digital imaging has put many former camera giants in some serious trouble…

The explosion Number of film and digital cameras sold in the United States

Kodak…

… Polaroid…

… Leica…

Konica…

… Agfa…

… Bronica…

Pentax has also been in trouble.

Losses and layoffs have become more frequent in recent years.

It’s easy to blame the general recession…

However, recessions are always particularly hard on companies with structural problems.

The interesting thing with the Pentax story is that the problems seem to have come after the shift to digital imaging.

Let’s go back in history and take a look at how Pentax handled the shift to digital imaging and what happened after this.

In 1952, Pentax introduced the first Japanese 35 mm camera. Ever since, the company has had a strong competence base in optics, producing lenses, binoculars and other optical instruments.

The cameras were exported to the United States under the name Honeywell Pentax. The company grew just like the entire Japanese camera industry in the period 1950-80.

Analogue cameras are a mix of many technologies: optics, precise mechanics and some electronics.

Digital cameras are a mix of electronics, optics and some precise mechanics.

Having a strong competence base in optics, Pentax chose to focus on this and develop digital cameras together with consumer electronics companies.

The first digital Pentax cameras were co-developed with Hewlett Packard, and later on worked with Casio as well.

The Pentax Optio was co-developed with Casio. Pentax provided the optics and Casio made the electronic components. Thanks to the modular structure of digital cameras, this kind of collaborations worked well.

The corresponding Casio camera was called Exilim.

The modular, standardized structure also implied that consumer electronics companies could work on each component.

Memory cards…

Image sensors…

LCD screens…

… could be developed by companies like Sanyo.

Sanyo provided the big camera firms with electronic components, and they could instead focus on optics, design and development.

Thus, a company like Pentax could survive the shift thanks to the modular structure and its great skills related to optics.

However, the market for compact cameras became increasingly competitive over time.

Products like Canon Ixus…

… And Nikon Coolpix flooded the market.

It doesn’t matter if a market is growing if it is also becoming fiercely competitive.

And from 2003-04 and on, sales of compact cameras actually started to decline.

The reasons?

Mobile cameras had become good enough.

SLR cameras had become cheap enough.

Tough competition, declining sales (and prices) of compact cameras implied that Pentax was in trouble, despite surviving the shift to digital imaging.

In July 2005, the CEO Mr. Urano said: "We'll shift focus to more profitable single-lens reflex digital cameras, to offset price declines in compact types."

Since the market for SLR cameras was still growing, Pentax shifted to this higher segment of the camera market.

Once again, Pentax co-developed digital cameras, this time with Samsung.

“In the digital era the pace of innovation is so fast. We have embarked on this joint development to increase our speed.” //Ko Torigoe, Pentax Senior Executive Officer

This resulted in the Pentax K10.

But this did not really help. Having been outperformed by Canon, Nikon, Sony and the others, Pentax only had 3 percent of the DSLR camera market at this point.

Later on, Pentax launched the K20D, another SLR camera aimed for higher segments of the market.

The launch was a big PR event…

But despite heavy investments in developing SLR cameras, Pentax lost market shares.

Massive economies of scale and R&D were needed to survive in this industry and few companies could keep it up.

The SLR segment was subject to very tough competition as well.

Given the competitive climate, Pentax sought to focus more on optics and expand its medical equipment and optical component business.

"We want to balance our portfolio by making the imaging systems, medical gear and optical device businesses each make up about a third of sales" // Fumio Urano, CEO of Pentax

Due to these difficulties, Pentax was now bought by Hoya Corporation

After a lot of turmoil and the resignation of Mr. Urano, the merger was finally completed in October 2007.

Pentax had been under increasing pressure from its shareholders to accept the offer.

In early 2008, Hoya announced that Pentax as a company would cease to exist and only remain as a brand.

Hoya had bought Pentax in order to enhance its capabilities in optics.

Pentax had plenty of knowledge related to endoscopes, intraocular lenses, surgical loupes, biocompatible ceramics.

However, the camera business kept generating losses and things got even worse when the recession broke out.

After the huge losses, Hoya has announced that cuts will be made, both in production and in R&D.

These cuts will lead to even less competitive products, which in turn implies even lower revenues.

Pentax has entered a vicious circle where the problems will generate even greater problems. Can such a company survive in the long term?

When a company in a competitve digital market starts to cut down on R&D, it is usually an indication of a collapse in the near future.

Who knows what will happen… Maybe Hoya will keep the optics and sell the Pentax brand to Samsung or another company that wants to grow in the camera market.

So, what lessons can be learnt from the Pentax story?

1. Surviving a shift to digital technology does by no means guarantee success in the long term. On the other hand, such a shift usually implies an increased competition and a furious technological development.

2. It is possible to survive digital revolutions by pursuing collaborations.

3. It is never sustainable to lag behind in a digital industry. Given the rapid improvements, second-movers can in the end neither compete on price nor on performance.

“A revolution is not a tea party” // Chairman Mao

Sources www.dpreview.com International Herald Tribune The fotolia blog www.auspiciousdragon.net

Image attributions

Christian Sandström