By Sophie Knight
TOKYO (Reuters) - To stem the red ink on its loss-making camera division, Olympus Corp has decided to rely on a format that so far has been a flop outside of its home turf in Japan.
The company on Tuesday released the "OM-D E-M1", a mirrorless model Olympus says is the first of its kind to compete on quality with traditional single-lens reflex (SLR) cameras.
Olympus is now hoping the E-M1, priced for the pro market at 145,000 yen ($1,500) for the body alone, will help it boost mirrorless and SLR sales by 24 percent to 7.3 million units to allow its camera business to finally break even for the first time in four years.
The new model is the successor to Olympus's E-5, its last flagship SLR released in 2010. Executives are saying there are no current plans to develop more SLRs and the new camera likely signals the company's exit from a market that is dominated by Canon Inc and Nikon Corp.
The E-M1 illustrates Olympus's dedication to the mirrorless format, heralded at its inception as a happy marriage between the size of a compact camera and the picture quality of an SLR. But the format has so far failed to connect with consumers outside of Japan, with most seeing it as an awkward compromise.
Most consumers prefer smartphones for taking snaps when weight is an issue and opt for pricier SLRs when quality is a priority.
Research company IDC originally projected the mirrorless segment to grow 31 percent in 2013 and to more than triple by 2017. But dramatically poor sales earlier this year prompted the company to change its forecast to a 1.2 percent drop this year and expansion of just 24 percent by 2017.
Olympus admits that its overseas marketing has been lacking so far.
"This is the kind of product that we have to carefully explain to individual consumers. It's not just a point-and-shoot that you can leave out on the shop floor and it sells by itself," Olympus President Hiroyuki Sasa said at the product launch in Tokyo.
Tech bloggers who had been invited to test-drive the E-M1 in advance were effusive about the camera on Tuesday, praising its retro design, image quality and compatibility with all Olympus lenses, a first for the company's mirrorless models.
But some criticized the camera's sluggish autofocus, a fault that has plagued mirrorless models and disqualified it for sports photography, thus barring it from a chunk of the pro market that Olympus is attempting to capture.
Last year, the company's camera division lost 23.1 billion yen ($231.99 million) as compact camera sales shrank by a third and it shifted 6 percent fewer interchangeable lens camera sales, mostly mirrorless.
In May, the company announced a plan to trim its camera division by cutting 30 percent of staff and whittling its production base to two factories from five. The camera division accounts for 15 percent of sales and is dwarfed by its profitable endoscopy business.
($1 = 99.5750 Japanese yen)
(Editing by Matt Driskill)