Leica, the German maker of the famous lightweight, rangefinder cameras that captured some of the 20th-century’s most iconic images, has ended its 2015-2016 fiscal year with record sales.
Sales climbed by 12 percent to €365 million ($416 million) year-on-year, and profits also rose, Chief Executive Oliver Kaltner said in an interview with Handelsblatt.
The company, based in the central German city of Wetzlar, nearly went bankrupt in 2004 but managed to turn around business and is now back on a growth path.
Leica, which has relied on extremely expensive technology and an unreserved belief in premium quality to bounce back, is now entering into a partnership with Chinese electronics giant Huawei, the world’s third-largest smartphone maker, to fuel growth.
“The cooperation is a new chapter in Leica’s history and of course is meant to be long-term,” said Andreas Kaufmann, 62, majority shareholder and head of the non-executive supervisory board.
“Camera modules in smartphones have to be compact,” Mr. Kaufmann said of the collaboration, adding: “Photographic sophistication can still be improved with our help.”
“We've been focusing for a long time on mobile phones, because we view them as a key piece of equipment for a certain type of photography.”
With the predecessor company Ernst Leitz in Wetzlar, Oskar Barnach invented in 1934 the world’s first compact 35-millimeter camera, which revolutionized photography and generated a steady flow of revenues.
In 2004, however, Leica Camera was on the verge of bankruptcy. It was then that Mr. Kaufmann decided to climb aboard with his private equity firm ACM and begin restructuring Leica. He was joined in 2011 by Blackstone, the U.S. financial investor, which today owns 45 percent of the camera manufacturer and ACM the rest.
Mr. Kaufmann and Oliver Kaltner, 47, who has been chief executive of Leica for a year, were eager to talk about the future of the storied camera manufacturer in the era of smartphones, selfie hysteria and social media.
“We’ve been focusing for a long time on mobile phones, because we view them as a key piece of equipment for a certain type of photography,” Mr. Kaufmann said. “The smartphone is now the snapshot camera – and in the analogue era, we also made entry-level cameras for this market. Now the issue is how we can transfer what we do into this new world.”
Mr. Kaltner said Leica sees itself as a bridge-builder because it hasn’t been as disdainful about smartphones as some other camera manufacturers.
“Smartphones are confronted with an urgently needed innovative leap,” he said. “We want to be involved.”
As for cultural differences between the two companies, Mr. Kaufmann said this was “normal” and added that both sides can learn from them. “Huawei isn’t even 30 years old now,” he said. “It’s a company that is worth billions and still has a spirit of adventure.”
Asked why Huawei and not Apple, which partnered with Leica on an earlier product, Mr. Kaufmann noted that several makers of cell phones and notebooks approached the German camera maker about a partnership. “But more than any other company, Huawei recognized and praised the technical competency of Leica,” he said, adding that the Chinese manufacturer “itself brings in a lot of know-how.”
In addition to its position as a leading suppliers of smartphones, Huawei is one the world’s largest manufacturers of telecommunications equipment, delivering products to a wide group of businesses and consumers.
“We’ll be coming into contact with new, much larger target groups, some of which may be interested in our core products in the future,” Mr. Kaltner said.
When it comes to photograhpy, he argues that 80 percent of today’s smartphone users are concerned more with the integrated camera’s speed and ease of use than with the finest nuances in picture quality. “But 20 percent of the users are interested in learning more about photography and possibly becoming involved with a real camera at some point,” he said.
Mr. Kaltner views the partnership as mutually beneficial.
“Our Chinese partner is pursing two strategies: becoming established in the premium segment and focusing on the camera function,” he said. “Huawei knows how important photography is.”
Billions of pictures are posted every day on social networks, but the impact of the phenomena is debatable.
“The saying goes: Everybody shoots, nobody looks,” Mr. Kaufmann said but noted approaches to solving this problem, pointing, as an example, to the Internet company called I-shot-it.com, which continuously presents and judges photo competitions to evaluate pictures professionally.
He cited Snapchat as an example of another business model in which pictures disappear shortly after being opened. “In the future, our industry must also respond to issues of attention span,” he said.
In just five years, sales of digital cameras have fallen globally by more than half to less than 60 million.
“What’s important is to face the new reality in time without losing sight of one’s own roots, one’s own identity.” Mr. Kaltner said. “In the last 102 years, Leica has repeatedly and successfully confronted massive changes in the market.”
He noted that the company is investing 11 percent of its revenues in research and development. “Only in this way can we keep our innovative power competitive in the future and react quickly in the markets,” he said. “We are entering the partnership with Huawei from a position of strength.”
Mr. Kaufmann pointed out that Leica is the only one of its size in the camera sector still headquartered in Europe. All other camera manufacturers are based in Asia.
Leica sells almost 90 percent of its lenses and cameras abroad, which could pose a problem because of the precarious economic situations in China, Russia and South America. Mr. Kaltner said the company’s biggest market is the United States, followed by Germany, China and Japan.
“We are able to balance out quite well the crises in other regions,” he said. “Important introductions of products such as the Leica Q or Leica SL have activated our relevant markets at the right time.”
Leica has few stores abroad, but that might change.
At the moment, the company has 34 of its own stores, 35 with partners and 135 shop-in-shop outlets. “We plan to open at least 10 more Leica stores and boutiques per year,” Mr. Kaltner said.
Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany’s Mittelstand (small and mid-size) and family-owned businesses. Thomas Tuma is a deputy editor in chief at Handelsblatt. To contact the authors: email@example.com and firstname.lastname@example.org