Priority investment in life-care and the run of eyeglass-lens acquisitions (2012)

Combining two earnings streams that swing differently

At the pith of this decision lies the fact that a company holding two businesses of different character deliberately steered its resources toward the consumer staple that is resistant to the business cycle. Components for semiconductors and HDDs grow flush when the market turns up and slump when it turns down. Eyeglass lenses, by contrast, lack flash but keep selling as long as life goes on. Having lived through the worldwide swings in demand from 2008 on, HOYA chose this stability as the base of its earnings and, starting with the acquisition from Epson, bought up small and mid-sized makers one company at a time to stack up the scale of the business.

That said, a strategy of stacking up acquisitions has its price. Take in small and mid-sized makers one after another and the gap between the purchase price and the net assets received piles up on the balance sheet as goodwill, carrying the danger of impairment should the assumptions about a business go wrong. Even so, HOYA built the number-two position in the world eyeglass-lens market, behind the largest maker EssilorLuxottica, and set life-care — little swayed by the economy — as a support for the consolidated whole. A business that sways with the market, and a business rooted in daily life: the key to this decision lies in a design that, rather than betting on either one, combines two earnings streams that swing differently and smooths the whole.