E-mail updates
Follow on Twitter
Subscribe to RSSEastman Kodak appears to be staying clear of bankruptcy proceedings for now, but time is clearly running out for the 130-year old industrial icon to reinvent itself for a digital century.
Kodak stock, which had fallen into penny-stock territory Friday on published reports of an imminent Chapter 11 filing, rebounded Monday to close at $1.34, a gain of 90 percent on the day after the company strongly denied the stories.
“Kodak is committed to meeting all of its obligations and has no intention of filing for bankruptcy," the company said in a statement after news that it had hired legal advisers in connection with a possible restructuring.
“It is not unusual for a company in transformation to explore all options and to engage a variety of outside advisers, including financial and legal advisers," the company said in its statement.
In any case, with Kodak teetering on the precipice, there is wide consensus the imaging company which has been around since President James A. Garfield needs to reinvent itself to survive.
Kodak, of course, grew into a global colossus on the strength of its film business, popularizing the technology beginning in 1900 with its Brownie camera, which sold for a dollar (film was 15 cents). A few decades later Americans' love affair with pictures grew deeper with the launch of Kodachrome color film. Kodak also expanded into TV and movie film products as well as medical imaging, but for generations of Americans, the name Kodak was synonymous with snapshots of milestone moments and memories.
Ironically Kodak also pioneered the digital camera that was the beginning of its undoing.
In 1975, engineers developed a bulky camera that used a cassette recorder as a kind of proto-memory card and required 16 batteries to operate. Its inventors dubbed it "film-less photography" and guessed that the contraption wouldn't have a market for the next 15 to 20 years. When the digital revolution took off, Kodak increasingly was left behind due to its reluctance to cannibalize its lucrative film and paper lines.
"I moved away from the stock a couple of years ago because I believed [digital technology] didn't get the proper investment and it didn't win the turf battles inside the company," says Joan Lappin, founder and CEO of Gramercy Capital Management Corp.
One challenge is that cheaper, nimbler competitors have taken off with the consumer camera business. Kodak's digital camera unit typically gives the company a fourth-quarter revenue bump due to holiday spending, but it's a boost of diminishing returns because the competition is so cutthroat. Company execs have realized this, however belatedly, and are reducing their focus on this product line. Unfortunately, they're doing so at just about the worst possible time for the company to lose a big chunk of revenue.
"In recent years, Kodak has (partially) redeemed three unprofitable quarters with a strong fourth quarter built on a high-volume holiday season," James Kelleher, director of research and senior analyst at Argus Research, wrote in a recent research note. "But given its mix shift away from consumer digital and toward less seasonal growth businesses such as commercial imaging, we believe that the company as currently constituted can no longer count on a strong cash-flow finish to the year."
"Ultimately, I think they should exit the camera business itself," says Mark Kaufman, special situations analyst at Rafferty Capital Markets. CEO Antonio Perez, a Hewlett-Packard veteran, has put the focus on the company's inkjet and commercial printer divisions. But there's intense competition here, too, Citigroup analyst Richard Gardner pointed out in his most recent research note.
Kodak is pinning its short-term hopes on selling a cache of 1,100 patents that have already borne fruit for it; the company has extracted nearly $2 billion over the past few years in licensing fees from companies in the smartphone business and is in litigation with Apple and BlackBerry maker Research in Motion over another $1 billion in licensing fees. A buyer could use the patents or earn additional royalties on them from manufacturers of multifunction devices that are replacing standalone digital cameras.
But analysts question whether milking a collection of a patents is a viable business strategy. Some drew a comparison with Nortel, a telecommunications company, that generated a lot of cache by selling patents.
"[V]iewing the Nortel patent sale as a template for Kodak's salvation contains one salient fact that is often overlooked: no one stepped in to buy the Nortel patents until after Nortel went bankrupt," Argus's Kelleher wrote in his research note. "Kodak may thus be racing the clock amid a growing cash burn that threatens its solvency."
Still, Kodak has believers.
"The company is not going bankrupt," says Ulysses Yannas, broker at Buckman, Buckman & Reid. When Kodak recently drew down $160 million from a line of credit, the market reacted negatively, but Yannas argues that the move actually helped the company save money. Most of Kodak's cash is overseas, so bringing it back would mean paying taxes on it that would cost more than the interest the company is paying to borrow those funds.
Provided Kodak can avoid running out of money in the near future, the company might see its fortunes reverse once again, as the cheap digital camera manufacturers that have been eating its lunch for the past decade are edged out by the growing ubiquity of smartphones, tablets and other devices that have cameras built into the hardware. "People want to communicate not just with voice and data, but pictures as well," says Kaufman. "It's fortuitous."
Gardner and others aren't convinced Kodak's intellectual property is a silver bullet. The company has relied on settlements and one-time licensing payments to stay afloat, so even if it can sell the patent portfolio it's shopping around now for top dollar, it's going to have to come up with a sustainable source of income in the future. "If IP licensing and asset sales do not come through as expected," Gardner says, "[O]ur model suggests that Kodak could run dangerously low on cash."
CNBC's Brian Shactman has the story on Eastman Kodak's possibility of filing for bankruptcy.
Leave a Comment:
Many years ago while I was an employee of Eastman Kodak, I was concerned enough about the digital future that I submitted a neo-throwback slogan for the company: "Kodak Makes Your Pixels Count."
Alas . . .
Kodak is the poster child of old farts from the good-ole boys club running a 130 year old business into the ground. In many ways, Kodak is the dying canary in the coal mine indicative of the poisonous business climate killing USA.
Kodak's old farts couldn't see the revolutionary digital camera aimed between their eyes just as the stupid old farts of Kmart couldn't see Walmart, the stinking old farts of GM and Chrysler couldn't see the foreign imports, and clueless old farts within LehmanBros, BearStearn, Citigroup, MerrillLynch, AIG, Countrywide, BoA, WaMu, and Wachovia, couldn't see financial meltdown from the implosion of the housing bubble.
Today, 99.9% of the digital cameras are made in Asia. America makes none. As a matter of fact during the past 30 years, America didn't make any of the revolutionary products: VCR, LCD monitor, LCD-plasma TV, laptops, hard-drives, cellphones, tablets, iPhone, and even the humble office fax/copier. Fear not. Whatever America lacks in real manufacturing capacity the Federal Reserves recovers by making green-backs, 24/7, to buy the goods from Asia.
Instead fostering a productive economy, the old farts in the American government makes wars and create a phony economy based on a housing bubble inflated by mortgage guaranteed by Freddie/Fannie. In undertaking both of these ventures, America went bankrupt despite borrowing over $2trillions from the Chinese and Japanese.
i love the word, 'fart'.
FatCat, Old Farts is correct! I seen it for thirty one years with this company! Folks, Antonio Perez is now Obama's newest job creationist for America! He canned thousands at Hewlett Packard when he was CEO and did the same thing at Eastman Kodak! Apparently, too bad Perez's visits to the White House beer parties didn't pan out any stimulus money for his company! Borrowing $160M line of credit because their cash is overseas, the S&P lowering it's credit rating to CCC, and waited a whole two weeks to make some sort of annoucement on what's happening, spells disaster for the ole shutterbug! File the Chapter 11 and get it over with! Wall St. is tired of excuses! Good Night Kodak! It was a good ride until the Old Farts ruined it completely!
Analog imaging has gone the way of analog audio.
As the article states, the competition is intense - frankly, I don't believe that any of the camera or printer manufacturers are making much money in this business ... but most of the current "name brands" have other businesses and the camera/printer product lines are mostly there to support a broader ecosystem for the company. Kodak, unfortunately, does not have the broad product line to fall back on.
As a person who's been in Photography retail sales for over 34 years I can see why the "Big Yellow Monster" would soon go to the way-side. For example, with the super eight format, they added sound recording to there movie film too late, as video tape was creeping in and made the format lose a big market share. With there photography film format they came too many new types. First the 126 cartridge followed by the 110 cartridge that used a small frame Then the stupid Disc format, followed by the even more lame the APS cartridge. All of which is history. They spent way to much developing new type that were never meant to last. They did however have the 35mm format, but never did anything to advance it. Unlike Fuji, who always worked on improving there films. The only thing Kodak got right was the Kodachrome films, and they killed there golden goose. There number one mistake was to think they were the only game in town. Not any more. Canon, Nikon, Sony, Pentax and many others beet them out of the digital age. When early on Kodak had the technology but never used it.
Its obvious from your yellow monster coment that you dislike Kodak, not based on thier products but on thier business pratice. Kodak b&w films improved by leaps and bounds with the invention of T-Max, and the color Portra Films, put Kodaks products in the fore front of the wet processes. Kodak photo paper was just as good as any other brand, each brand had its little niches, warm, cold, cool, ect, and personal taste was the only reason to choose one over the other, quality was never an issue. No i was never an employee, i was educated in Fine Art Photography, just before digital came out.
Digital is fake. NO digital file is equal to a NEGATIVE, any DIGITAL file can be altered, manipulated, made to show fake or false images, NEVER allow your freedom or financial safety to depend on a digital file. Any digital "imaging" program will prove that to you. "I have it on film" no longer means anything.
Oh and when your computer gets a virus or crashes, kiss all your family and wedding photos goodbye.
Radical1 - may be so, but you still lose ! All I know is that my digital photos are sharper because I don't have to go through the translation processes (developing film, reverse imaging (analog printing) etc). I also don't have to carry 30 rolls of film in a lead bag when I travel, and I don't have to pay incompetent labs to screw up my precious photos.
i blame the old farts.
Radical1, thank you for representing the old farts. You obviously don't know what you're talking about, especially when you mention losing images when your computer crashes. Any half-witted photographer knows how to back-up their images so that doesn't happen. And any medium can be faked, even film.
Radical 1,
I have to agree with what you have said, however the sad reality is that film has gone the way of many other superior technologies that got beaten by convenience. Kodak used to be part of a widespread consumer market, but that has changed. The key I believe is understanding how to survive in what becomes a niche market. I love what film offers, but I must admit that I also love the convenience of digital for so many applications.
Kodak has always stayed true to its love of the film attributes, but in reality it managed to survive because it had mass market appeal with cartridge films and those "low end" markets for their technology. You could say that the mass market products supported the greater goal of continuing to produce and advance very high quality professional products. Film processing machines at the local drugstore helped for awhile to provide some level of quick convenience for the mass market, but at best, that was a compromise. I think that in practice, this just made it a little more attractive for the average consumer to delay their transition to digital. Part of the problem too was that the consumer market Kodak products didn't offer any real significant advantages over digital. The disposable 35mm cameras actually could produce some decent quality with the better, larger format films, but then the lenses and mechanics of the cameras was pretty low on the quality side. Another trade off geared toward the mass market.
As the camera market got better with some pretty high quality 35mm equipment, Kodak was able to capture the majority of that film market. But this too was a limited market as the average consumer wasn't willing to part with the money for a really good camera. Additionally, even with advanced electronics, it still required the user to have some skill to get the really good shots. Most people really couldn't take advantage of the higher quality equipment and film. They might get lucky form time to time and get some superior results, but most couldn't tell the difference between their expensive camera results and the cheap pocket camera results. Digital offered some advantages for the average consumer. Instantly being able to gauge their results, software to fix typical simple problems and essentially no cost associated with their bad results. Just the ability to quickly crop a poorly framed shot, gave low skilled photographers, considerably better results.
Kodak should have seen the handwriting on the wall and realized that there were far too many reasons for the mass market to not transition to digital. They tried to be a part of that transition, but they didn't really do it very well. Kodak probably should have concentrated on owning the film market and dominating it. Sort of a getting back to basics approach.
I surely hope that Kodak survives and stays true to the film that created it. As you say, you just can't beat certain aspects of film photography, but for the mass market, average consumer, digital has too much going for it to not win out over film.
As goes Kodak - so goes America....
How very true. I was there for 30 years and watched as they wasted tons of money (not on me, though). Kodak's albatross was pride. Remember the disc camera fiasco of the 80's? Tons of money on state of the art production facilities for a 19th century technology (seriously!) and it tanked right away. Then there was hanging on to 110 too long. Then there was their own odd size "35mm" equivalent. Tank. It was endless and all attributed to upper management.
I worked at Kodak for 27 years and was laid off in 1997 during the "digital revolution" madness from my job in 35mm film manufaturing. The week I was let go there were 10,000 others just like me. It was a wondeful place to work and I owe my current success to what I learned there. It's a shame a once proud giant, who took care of their employees, has fallen so far.
Its called business. We use to have major manufacturers of wagons and it morfed into the car business and finally went under. As with all technologies they all mature and if you stay stagnant then you fall prey to the competitors. Has anyone seen a whaling vessel lately? What about buggy whips? Kodak has been around for over 100 years and it had its hayday, but they failed to stay out front. Now Fuji, Cannon, Minolta and others have moved to the forefront and poor Kodak is left as a penny stock. We had Pan Am, TWA and others, but they went by the way of the doodoo bird.
Maybe we should sell all the tired companies off to the Chinese and let them eventually close them down. That way maybe we can get the bucks to start a new and better company. They seem to like the older brands just look how much they like Buicks.
Kodak: The 'picture' company should play to their strengths and reinvent itself as an ORGANIZER of memories.
While there are services that do a great job of printing pictures and online storage the best 'albums' I've seen are suitable only for small collections of photographs and have no flexible annotation/search/ sort/presentation capabilities. Maybe Kodak could offer a product to fill that market need (Hint: That will require a paradigm shift from a manufacturing company to an information technology company)
Kodak just wasn't nimble enough. Panasonic, for instance, has introduced several "point and shoots" with Leica F2 lenses. It sets them apart as far as quality images. Several are offering waterproof cameras as so many amateurs tend to drop theirs in the toilet.
Just because the company survives does not mean that it will look anything like what it was or is today. It will employ much fewer people and it will be based on a completely different business model. It will be as big a transition as IBM did in the 1990s and how GE re-invented itself in the 1980s.
The Kodak name means more than what the company does at this point. Why not sell the name?
I think the problem with Kodak is they been around for a long time doing the same thing, as with all of the major companies in America. We still use the same combustible engine we were using a hundred years ago, yeah we made it look different, get a little better gas mileage, and yes...it still burn fossel fuel. Another problem with the US is, we will run an Idea in the ground, we will run it until so many people get hurt that we have no choice but to change. By then the rest of the world, or most of it has moved on to the next invention or working on it. Japan have been working on electric cars to the point where they are bringing them to market. We'd rather wait and see how it works first, then make a move, thats reacting, not acting. We use to act and let the rest of the world play catch up. The bottom line is this, I think, times are changing, and if we don't change or set that change in motion, we will find ourselves standing by the wayside wondering what the hell happened. It's not about money, if your product is good you'll make the money, it's about moving forward, not backwards. I'll bet Kodak will pay some consultant about ten million dollars to tell them something they should already know, sounds like easy money to me.
How true. The problem is with American management, not just at the company but also at the government level. Shortsightedness and short-term profit orientation is the downfall. Ten years or so ago I was wondering about Kodak when digital photography was starting to hit the market. Wonder why the high-paid CEOs weren't asking the same quesion. Our other downfall is the superiority complex - we don't need the lowly manufacturing, we are smarter so we'd just sit there and innovate in the new economy. That's been our mantra - and look where that superiority complex had led us.
Saw a similar decline with DEC (Digital Equipment Corp), at one time the second largest computer company in America. But the founder/CEO didn't embrace the PC world and the Internet (SUN), eventually what was left was sold to HP.
Remember National Cash Register (NCR)? They were a big computer maker for a time, too. Xerox had a brilliant design for a desktop computer that used icons and a mouse (what a concept) but they piddled it away, and Apple stole their ideas and created the Macintosh computer. And so it goes...
They certainly waited long enough.
and the main issue is, the corporate managers are all old farts who fart and are old and can only produce farts and not products, the old fart heads.
and the main issue with you is your apparent refusal to grow up ..... the secondary issue is your limited vocabulary ..... poor thing
just having some fun.....not interested in becoming a serious old fart.
Kodak cut its own neck not with failing to climb on the Digtal band wagon but by killing film off. Just as many other company sold Film camaras in the day as they are now selling Digtal.
Where Kodak failed was in killing off Film and film deveopment before its time. They stop selling some film becaue sells dried up but why did sells dry up? They first stopped selling the cemicals and other things that went into deveopment. I final bought a Digatal SLR after years of trying to stay with film, why did I? No one deveopments film anymore. It takes many thousand of bucks of Digatl equebment to come close to what a simple 35 mm SLR and a roll of color slide film can do.
Just think how much histrory is going to be lost in the next 50 years because of digatl files lost with hard drives or saved on CD/DVD discs. ( think floppy discs people whenwas the last time you could read one.) Throw a real print or negative in a box and in a hunded years some one can view it. Throw that CD in the same box and 10 years from now and its unreadable. Print out digatal image with a printer and it will have faded away after less than 20 years.
Evolution is never pretty to watch. As the great dinosaurs, the once undisputed rulers of the land, realize too late that there is something "strange" about the new climate, the small upstarts that were less than insignificant at first find that they do just fine in the new climate. No...They THRIVE in it. And we can only watch as the dinosaurs slowly die. *SNIFF*
I didn't drop it, I was taking a close-up.
If kodak could "reinvent" those old negative plates into some sort of green-energy the pres would give them a huge loan guarantee to piss away.
Long about the time Kodak wasn't even the only competitive brand of film (Fuji was one good competitor) they probably were not doing enough to hold onto their identity and brand. Essentially the same sort of thing happened with copying machines. At one time EVERYTHING produced on a copier was said to be a "Xerox" of something or other even when it was not.
Kodak just didn't keep up. The same might be said of Chrysler. Everyone in my generation had at one time or another a Kodak camera and used Kodak film. It seems they forgot that something or someone might be gaining on them.
decades old business practice, no flexibility . its the same thing thats going to kill off the music and film industry's . lol they could start suing their customers though . thats working well for hollywood.
That is what happens when you have a conservative mentality of standing still or looking backwards to the "good old days" in 99.9% of situations in business or otherwise because you will get passed by.
P.S. Nature favors progression and progressives.