The news that Olympus is ditching their compact camera division this week caused quite a stir, but I can't help but think that the camera manufacturer is on to something. I've long thought that entry-level compact cameras are a Bad Idea. Nikon's line-up is a great example: Their SLRs are phenomenal. The Nikon 1 series are incredibly capable machines. But their $80 entry-level cameras are best avoided. It's not a particularly closely guarded secret that they're contract manufactured in a completely different factory, the design isn't done by the core Nikon team, etc. Basically, the entry-level cameras don't look or feel like Nikons.
The same goes for Olympus, but they also have a couple of other challenges they're facing.
There are two ways to look at this:
1) If your first camera is a cheap Olympus camera, you might be happy that it didn't break, and you'll buy another Olympus further down the line
2) If your first camera is a cheap Olympus camera, you might be appalled by the build quality, and decide to go elsewhere.
It's a hard gamble, because for cameras that are sold for less than a ton, it's pretty obvious that camera manufacturers have to cut corners somewhere. Cheaper enclosures and naff colours mean that they look and feel cheap. Cheaper LCD screens makes it hard to see how good your pictures came out. And cheaper lenses, sensors, and processors means that the camera will be slow, that there's a physical limit to how good the photos can be, etc. On top of that, the cheapest cameras often end up in the hands of people with the least of a clue - the very same people who could benefit the most from having a more 'intelligent' camera.
So, in deciding to pull the plug on their cheapest cameras, Olympus is making a wise move: They probably can't (and shouldn't) compete in a market that's a race to the bottom: Developing a cheap camera that is designed to be as good as it can be means spending a metric arse-tonne of cash on development, then another huge amount on manufacturing an enormous quantity of them, then piling in the marketing dollars to shift 'em. And even then it's a gamble, hoping that Nikon or another bottom-end manufacturer didn't happen to release a slightly better (or slightly cheaper) model a couple of weeks before you did.
Good riddance, I say: Olympus can now continue focusing their attention on the spaces where they are true innovators: The Olympus OM-D, the other mirrorless cameras, and their superzooms.