Not too long ago it was almost inconceivable Sony would be behind Samsung, Apple (News - Alert), LG and other companies in the consumer electronics market. The company manufactured quality innovative products, but now it seems it is not capable of anticipating what the market wants like it did in the past.

On the other hand, the problem with Olympus has to do with unethical behavior regarding the health of the company in the 1990’s. The $640 million investment in Olympus will give Sony a stake in a company with solid medical imaging technology, and according to Sony President Kazuo Hirai the company wants to branch out into medical equipments.

Olympus is known for its imaging technology in consumer electronics and the medical field. It is the world’s leading manufacturer of endoscopes and with this partnership the companies said they would form a new medical equipment company later this year. Sony will own 51 percent, the remainder going to Olympus.

The collaboration will give the companies access to a large base of intellectual properties they hold and research for new products. The alliance will give them more bargaining power for materials acquisition for manufacturing and providing lower prices down the pipeline. This will give them the ability to compete with companies in China, South Korea and Taiwan.

The troubles with Olympus started when its former CEO Michael Woodford disclosed some discrepancies regarding how losses were being reported. It turned out the company made investments that resulted in a loss of $1.5 billion and failed to report it to its investors. During the investigation, prosecutors in the case pointed out an elaborate scheme designed to intentionally deceive the losses the company was incurring.

Hiroyuki Sasa, Representative director and president, Olympus Corporation said, “We have decided to form a business and capital alliance with Sony, which is strong in image sensors and other image-related technologies. Partnering with Sony will provide great advantage to Olympus and enable the two companies to exchange various complementary competencies. Investment from Sony will help strengthen our financial base. In addition, through this alliance, the strengths of the two companies will merge, certainly making it possible for Olympus to contribute to world medical progress by developing a variety of new medical devices that would not be possible by Olympus alone. In the field of digital cameras, we will seek to achieve collaboration in a manner that further improves the competitiveness of the two companies.”

Sony on the other hand is experiencing four straight years of losses by failing to introduce TVs, smartphones and music players with any innovation. It is experiencing the worst year in the 66 year of the company’s history. The company is going under a restructuring phase with new president Hirai after he replaced Howard Stringer in April.

Kazuo Hirai, president and CEO, Sony Corporation said, “As part of our strategic initiatives announced in April 2012, at Sony we are aggressively pursuing the growth of our medical business, with the aim of developing it into a key pillar of our overall business portfolio. The business and capital alliances we have agreed with Olympus today will be integral to these plans. By combining Sony's cutting-edge technologies in areas such as digital imaging, 3D and 4K* with Olympus's long-standing experience and established foundations in the medical market, we believe that we will be able to create highly innovative and competitive products and generate new business opportunities in surgical endoscopes and other related areas where significant future growth is anticipated.”

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