Tough times at Osram: Earnings falter, CEO leaves

The old Frank Sinatra line must be reverberating around Osram headquarters: Riding high in April, shot down in May.

Yes, fortunes can change quickly in the modern lighting industry, where old-timers like Osram are struggling to hold their ground against newfangled startups who are arriving in droves with slick new LED-only offerings.

Just last week, Osram was everyone's darling as it switched on the new lights inside Rome's Sistine Chapel, using LEDs to brighten Michelangelo's great ceiling into a visual sumptuousness that the world will behold for years to come. Bravo!

Fast forward to this week in Munich, where at company headquarters, Osram disclosed that fourth quarter earnings were well below expectations. Boooooooo.

Although it managed to eek out a profit of €12 million – a year ago it lost €29 million in the same three-month period – its performance 'was less than half the 28 million-euro consensus forecast in a Reuters poll of analysts,' news agency Reuters reported. Sales were virtually flat at €1.335 billion versus €1.332 billion a year ago; for the year, sales tumbled 2.8 percent to €5.142 billion.

Osram also announced that it is replacing CEO Wolfgang Dehen with industry outsider Olaf Berlien, who is currently CEO of German engineering and construction company M+W Group.

'Wolfgang Dehen will step down from the managing board as well as his other positions within the Osram group on his own request and by amicable agreement,' Osram said in a press release.

News agency Bloomberg reported that Osram made the change after Dehen 'underestimated the pace of an industry shift from traditional light bulbs to light-emitting diodes.'

Osram became the second venerable lighting company in recent weeks to look beyond the industry for leadership talent, as Australia's Gerard Lighting named a drinks industry veteran as its new captain.

Traditional lighting companies have struggled as they enter the LED business while also grappling with costs of their legacy technologies like incandescent, fluorescent, metal halide, mercury vapour, and high pressure sodium.

The rapid ascent of LEDs (light emitting diodes), which can last for over 20 years and save significant energy, has forced vendors to find business models that don't rely on selling replacement bulbs. Meanwhile, LED-focused startups like Opple Lighting, Aurora, Cree, TCP, LIFX, Acuity and others are gaining ground.

Last month, the difficult conditions forced Samsung out of the LED lamp and prompted Philips – the world's largest lighitng company – to seek 'alternative ownership' for its lighting group. Osram has already been down that road – it was the lighting division of German engineering conglomerate Siemens until the difficult lighting market induced Siemens to spin it off in 2013.

But even as an independent entity Osram, the world's second largest lighting company, has struggled. Last May it cut its sales target, and in July it announced an additional 7,800 job cuts on top of an earlier 8,700, as sales of traditional bulbs slowed.

The financial turmoil was the elephant in the Vatican's Sistine Chapel last week, where, amid the marvels of lighting up Michelangelo paintings and frescoes including The Creation of Adam and The Last Judgment, Osram declined to answer Lux's questions about how much the stunning project cost.

Riding high in Rome, shot down in Munich.

As new boss Berlien takes the helm in January, he could well start with a prayer: LED there be profits.

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Photo is from Osram

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For more from Osram's recent 'riding high' week with Michelangelo, watch our video and read: 

Industry trials and tribulations: 

 

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