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Once a bright spot, Nikon lowers profit target due to weak demand for mirrorless cams

The compact system camera (CSC) sector has been talked about as one of the few bright spots in the camera industry where manufacturers still have a fighting chance against smartphones, but recent news concerning Nikon’s less than stellar performance may require a new review of this analysis.

Reuters reports that Nikon Corp. has cut its profit forecast for the year because of disappointing demand for mirrorless CSCs, like the Nikon 1 J3 shown above. The company is cutting its forecast from 85 billion yen to 65 billion through March 2014. Camera makers have been relying on higher-end cameras like CSCs – which are more compact than their DSLR cousins but offer enhanced shooting features and interchangeable lenses – to make up for huge losses at the bottom, where basic point-and-shoot cameras have been walloped by smartphone cameras that have been getting progressively more advanced with each new model. CSCs have been viewed as a growth sector for camera makers.

According to Nikon execs, the disappointing sales were worse in Europe and the U.S., but CSC sales have been stronger in Japan. “In Europe and the U.S. the ratio of mirrorless to SLRs hasn’t grown at all, unlike in Asia, where it’s quite popular with women because it’s light. We had higher expectations for other regions,” Yasuyuki Okamoto, Nikon’s president, told Reuters. “But people who like cameras tend to just go for SLRs, even though they’re very heavy.”

The only good news seems to be from Nikon’s DSLR segment, which Okamoto says remains strong. Nikon says it plans to launch more “entry-class” DSLRs as part of its future strategy. And despite the reduced forecast, it’s still a 27-percent rise from a year ago, according to Reuters.

But it’s not just the U.S. and European markets that are hurting sales. China, which has been a consistently reliable market, is experiencing slower growth, although Nikon’s Okamoto is hoping for a recovery in the Chinese market.

The company is also cutting forecast for its multi-million dollar semiconductor products. And, Nikon isn’t alone: Olympus Corp. announced that sales of its CSC, the PEN, had fallen 12 percent in the first quarter. Canon Inc. also recently lowered its full-year earnings projection, citing worse-than-expected economies in China and Europe and a drop in sales for its DSLRs. (Canon and Nikon are the number one and two camera makers in the world, respectively, and both are powerhouses in the DSLR sectors.) The bad news come at a time when camera makers are struggling against advanced smartphone cameras and still trying to recover from a weak currency back home, the 2011 earthquake and tsunami in Japan, and floods in Thailand. 

With the disappointing results, is the CSC market coming to a premature end? Although it’s a cause for concern, it’s too soon to make any such predictions, Ed Lee of InfoTrends told us. “Q4 and holiday sales are the make or break time period,” he said.