OLYMPUS is a Japanese company that manufactures wide range of imaging devices. OLYMPUS enjoys a majority share of the world market in gastro-intestinal endoscopes. It has a roughly 70% share of the global market whose estimated value is US$2.5 billion. Also it competes with Ethicon, a subsidiary of Johnson & Johnson, in laparoscopic device market.
In 2011 OLYMPUS was accused of its falsified financial statements lasted for two decades to hide over $1 billion in losses. This fraud scandal, brought up by the company’s former CEO, put the company in scrutiny, losing more than 70% of its equity value on stock market.
In October 2012 Sony Corporation offered to invest about $642 million, ended up owning about 11.5% of outstanding share of OLYMPUS. (Sony’s share of OLYMPUS diluted to 10% as of today)
In April 2013, Sony and OLYMPUS established Sony OLYMPUS Medical Solutions (SOMS) as a joint venture. Sony owns 51% of its share, intending to develop high quality medical imaging medical devices leveraging Sony’s 4K resolution imaging sensor and 3D modeling technologies.
SOMS has not come up with any significant output yet. Allegedly OLYMPUS is not supportive to disclose information necessary to develop the new products.
Despite the scandal, OLYMPUS’s medical imaging business has been pretty robust. OLYMPUS’s stock price has recovered to 4,465 Yen (as of today) up from record low price of 424 Yen at November 11, 2011, bringing Sony more than $800 million of appreciated gain. Market capital value of OLYMPUS as of today is about $12.8 billion.
On the other hand, Sony, after the years of losses, has been facing strong pressure from its shareholders to reform its organizational structure, focusing on core businesses. $800 million of profit from OLYMPUS stock should be attractive to Sony’s restructuring.