Canon Inc carried out large-scale purchases of its own shares twice in February and March. The combined number of the purchased shares reached approximately 30 million, and their total amount, 200 billion yen.

“Canon’s acquisition of its own shares is a wise way of using its abundant funds on hand, valued at more than one trillion yen,” said a stock market source. A prevailing view in the market is to rate highly the company’s first purchase of its own shares. One of the reasons for the favorable market opinion is that the major manufacturer of imaging and optical products plans to use the shares for M&A activities and other schemes in the future, instead of simply cancelling them.

Canon estimates its group’s combined sales for the business year to December 2007 at 4.45 trillion yen, up 7.1 percent from the previous year, and the consolidated net profit at 495 billion yen, for a year-on-year increase of 8.7 percent. The company’s remarkable performance , especially in its digital camera and copier businesses , is expected to continue into the current term.

Canon has posted record high profits for seven consecutive terms and expects to set a new record again this year. Despite this blue-chip company’s high growth potential, market players are awaiting the emergence of a new favorable factor that may contribute to a further expansion of its business. Many players in the market regard Canon’s purchase of its own shares as an “option” for creating such a factor.

Canon showing interest in three business sectors

In which business sectors is Canon likely to pursue M&A activities? Chairman Fujio Mitarai referred to three sectors for the company’s next-generation businesses, at a corporate strategy conference held March 2. The three sectors are medical, intelligent robots, and safety.

Of these three arenas, Canon has put the greatest emphasis on the medical segment so far, and has developed several products, such as an X-ray digital camera and a Deoxyribonucleic acid (DNA) testing system. In this sector, however, there are powerful rivals, including Olympus Corp.

Industrial robots are an essential part of Canon’s project to develop unmanned, automated plants. But, its robots are currently used in its own plants alone, and have yet to be put into commercial production. The safety-related domain refers to the common base of technology for improving product quality and ensuring workers’ safety, according to Canon’s definition. It is not known what level of technology Canon currently possesses in this arena.

”We hope to commence commercial production of new products in the three business domains by around 2010,” said a Canon official. Although Canon will launch into these three sectors (which are entirely new for the company), it targets entering the new businesses in only a few years.

Market players are speculating on the short preparation time, and some contend that Canon will probably merge with or acquire another company that holds related technology, to effectively “buy time.” Admittedly, it is not certain whether this scenario will materialize. But Canon’s moves involving these three business domains are likely to become notable points for predicting the future of the company’s business.

Canon loses SED panel case and court begins calculation of compensation

A patent dispute involving surface-conduction electron-emitter display (SED) panels is being waged between Canon and Nano-Proprietary Inc., a U.S.-based high-tech venture business. A U.S. district court handed down a summary judgment in February 2007, in which the court said that Canon had violated the technical license agreement it had concluded with Nano-Proprietary.

Prior to this final verdict, the court has started calculation of the amount of compensation it will order Canon to pay to Nano-Proprietary.

Will Canon make a do-or-die resistance to the court’s decision or seek an out-of-court settlement? There is, of course, the third option of withdrawing from the business. Canon plans to release new TV sets equipped with SED panels in the October-December period. With the deadline drawing near, Canon is now being forced to make a difficult decision.

(Toshihiro Abe, Staff Writer, Nikkei Business)