Kodak in More Trouble

Eastman Kodak stock took a big hit on Monday after the company unexpectedly borrowed $160 million in cash, spooking investors. The stock lost nearly a quarter of its value, bringing its decline for the year to a dispiriting 70%.

Kodak officials downplayed the importance of the loan, saying its concern is to minimize taxes from overseas earnings and manage the seasonal nature of its cash flow.

Steve Sasson, inventor of the digital camera, in 2010. Photo by Aljawad.

The first known digital camera was invented by Steven Sasson at Kodak in 1975, using the charge-coupled device (CCD) developed by Willard Boyle and George E. Smith at AT&T Bell Labs in 1969. Kodak developed many digital technologies and still sees significant earnings from its patents, but has so far not been able to move away from its traditional core business quickly enough to manage a transition. Kodak announced in July that it would sell part of its $2 billion patent portfolio to raise funds.

In an article yesterday in the New York Times, a stock analyst says the company's tapping of its credit line "Just shows that the core business continues to burn cash," and another told Reuters that the company could file for bankruptcy "between now and 2012." Kodak stock is $1.84 this morning, up slightly since Monday's 38-year low.

Mike
(Thanks to Alexey Merz)

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Original contents copyright 2011 by Michael C. Johnston and/or the bylined author. All Rights Reserved.

Featured Comment by 12-east unwinder building 29: As someone who was born and raised in the Rochester N.Y. area, son of a 20-year Kodak man, and who worked two college summers there, I can't say I'm surprised. Kodak Park (excuse, please: 'Eastman Business Park') is a sad shell of its former self; many of the buildings there have been outright demolished.

"Funny/sad story about those demolitions, by the way. They were public events, and heavily covered by local news. They would interview some 30-year Kodak veteran who had spent their working life in the building they were imploding. The Kodaker was getting teary-eyed over the memories. Then cut to the Kodak PR person jumping up and down at the site, screaming about blowing up the competition with their new printers. Then cut back to misty eyed Kodakers. I've often felt that Kodak's marketers and PR people were the company's worst enemies."

Featured Comment by Dennis Huteson: "I know full well what they used to do, but what do Kodak do nowadays?"

Featured Comment by erlik: "Huh. So the change of the business model IBM advised is not working.... Which doesn't really surprise me when I think of it.

"It's one thing to sell off your consumer hardware business while the selling was good and retreat into the remaining lucrative business of IT services and enterprise hardware.

"It's completely another to try and change your business model when photography is all of your business. Where can Kodak retreat? They divested of their camera business. Can they become solely an OEM, no-name sensor supplier for cellphone manufacturers? Or a boutique film and paper manufacturer á la Efke?"

Featured Comment by Robert Meier: "I found out yesterday that Kodak no longer makes its Rapid Fixer, a staple of my darkroom for decades. Fortunately Ilford makes a similar rapid fixer, and, it turns out, even though it is made in Germany and shipped over here, it is cheaper.

"When Kodak stopped making B&W enlarging papers a couple of years ago, they just shut it down, rather than selling the division to someone else. I hope when the day comes that they decide that don't want to make B&W film any more, they will have the decency to sell the right to make it to someone who will. Freestyle, maybe?"

Featured Comment by Geoff Wittig: "Many of my patients are former Kodak employees, one of them a retired digital engineer, and they tell a depressingly constant tale. The company made such consistently high profit margins on their core business of consumer print film and paper that management had no interest in developing future product lines that didn't promise the same cushy margins. Kodak developed numerous brilliant digital technologies, then either let them languish or sold them for pennies on the dollar to other companies with smarter management. Yes, the market for inkjet printers/inks/papers is far more competitive with much lower margins than Kodacolor commanded...but today it's still a live market! The same goes for digicams, digital minilabs, digital medical imaging and on and on. Kodak pioneered the technology, then dithered on developing it until others took over the market. For the last five years the company has been amputating limbs and selling kidneys to keep the lights on a little longer, but they're running out of parts to sell.

"I can see Kodak's headquarters tower every time I drive into the city, but it's quickly becoming a depressing monument to collapse, like the Pan Am or Chrysler buildings in New York City."

Comments

[Peter Gilbert]

Kodak, IMO, has long been a poster child for how *not* to develop and implement a strategic plan from a failed mission. HP seems to be following right along...

[Dennis Allshouse]

Snark alert.

Maybe we can get Paul Simon to organize a concert: Kodak Aid.

[David Dyer-Bennet]

It's interesting that major camera companies like Nikon and Canon have handled the transition better than the film companies. I think people at Kodak would have said that they were a "photography" company, but despite the major important work they have done in digital imaging, they don't seem to have captured much market outside of film.

[Barry Reid]

Time to start stocking up on Ektar?

[Carl L]

Kodak left my commercial lab & studio 35 years ago, switched to Ilford for B&W and Fuji for color film. Kodak was just 2 steps behind at every turn and never caught up. One of my Maine Schooner friends back in the 90's was a Kodak tech guy. Even he knew they couldn't get it together.
Kodak was a great pioneer, but like the rabbit took to many technical naps and just never caught up.

[Robert Roaldi]

Nobody expects companies to last nowadays. All executives negotiate golden parachutes when hired to insulate (and insure) themselves against the assumed inevitable failure. And this becomes a self-fulfilling prophecy.

Finance used to serve the business community. Now we all serve Finance and we're even (mockingly) told that this is efficient, while someone else pockets the cash that was just saved.

Am I too cynical?

[Bill Bresler]

It may be time to start buying up as much TX400 120 as I can afford.

[Peter Rees]

I'm worried. I only recently discovered Portra and I absolutely adore it.

[Tom Kwas]

Poor Kodak, they haven't done anything right since the 70's and maybe before...changing film and paper to be easier and cheaper to make but killing the look of the stuff...we used to laugh that Kodak had the 'touch-of-s**t', everything they'd get involved in, they'd spend a fortune and it would be a non-seller. (8mm video tape anyone, years before Sony made it successful, for a while).

...you knew this was all going to happen when our Kodak tech rep in the 1970's, who was a photographer and owned a studio for years, suddenly one day turned into a 20 something RIT business school grad who had to 'get-back-to-us' to answer every basic question about Kodak products and our professional expectations, and had no photographic interest what-so-ever. Instead of people doing a study on Kodak to learn how NOT to run a business, it seems like that sort of method is becoming standard for a lot of other business.

I think about that every time I'd like to hire an unemployed 55 year old to do something I know that they can accomplish easily, and instead I'm forced to use a 20-something that really doesn't know all that much about it and really couldn't care less if it takes time away from texting his friends...

Robert Roaldi? Maybe you're not cynical enough!

[Bryce Lee]

As a many years retired from Kodak friend
suggested to me years ago; Kodak as a name
will be licensed to another company which in turn will manufacture that which Kodak did years prior.

Kodak as a company WILL die, sometime in the future.

Suspect poor management and the Peter principle. When you're good you're really
good but when you're bad you are really really bad eventually sucumming to
your past whatever it may be.

[Frank P]

WHEC News reported:

"The chief executive and chairman of Eastman Kodak Co. saw his pay package plummet 66 percent last year as the photography pioneer struggled to make headway in its long and painful digital transformation.

Antonio Perez received total compensation valued at $3.5 million in 2010, down from $10.2 million in 2009."

He drives a Bentley and hates Rochester. What an asshat. And what a stupid board for hiring him.

[David Teo]

According to the article, the CEO of Kodak was from Hewlett Packard?

Oh, that explains a lot.... Looks at how HP is doing now... And how they abandoned their tablet and PC business...

Time to stock up on Tri-X!!

[Kevin Purcell]

@erlik in the Featured comments: "Can they become solely an OEM, no-name sensor supplier for cellphone manufacturers? "

No.

They sold the CMOS sensor business in April 2011 to OmniVision Technologies Inc. It was essentially an IP sale with 850 patents (and designs) for $65 million. In Feb 2011 they were talking about getting $300 to $400 million for the CMOS patents.

http://image-sensors-world.blogspot.com/2011/02/kodak-to-sell-cmos-sensor-business.html

http://www.rbj.net/article.asp?aID=187152

They only have the (physically large) CCD sensor business (in the Leica M and S but I think they might be looking for other supplies given some recent Leica comments).

It's difficult to see what Kodak can do now. Their remain patents seem to be their only strong suit but I doubt they're worth $2 billion given the previous valuation.

[Mike Plews]

They never should have discontinued TXP 120

[ian]

Kodak. In New Zealand in the 70s I could choose between a half dozen companies, and Agfa and Fuji tended to work the best. They also priced better with the exchange rate, and seemed to respond to customer needs. In Britain in the 80s, it was Fuji and Agfa film processors in minilabs, in Europe in the 90s all the agencies I worked with were talking Fuji Velvia rather than Kodachrome 64.
Kodak sat on their butts, and did nothing for thirty years as the world changed. At least Nero fiddled while Rome burned...
If you need to write Kodak's epitaph in one word, you can do it using only 4 letters.
Fuji.

[ctein]

Dear Folks,

For further perspective on Kodak, see my TOP column from about two years back, "So, What About Kodak?"

http://tinyurl.com/2djs8gq

pax / Ctein

[John Robison]

I'll shed a tear and shell out $60 for another 100ft. of Tri-X.

But then I'm an old timer...really.
How old?
I remember walking into Altmans Camera on Wabash in downtown Chicago and buying a 100ft. of Tri-X and getting enough change back from a $10 to get a hamburger at Wimpy's down the street.

[Doug Cottis]

As a 37 year pro lab owner, I dealt with Kodak's high and Mighty we dont have to discount our products attitude for years. It thrilled me when I hooked up with Konica and later DNP which allowed me to finally earn a profit. I hope they spiral down the toilet bowl with all of my previous customer rep business cards

[Steve G, Mendocino]

Kodak's vision and direction problem started long before the advent of digital. Back in the 80's I was working in a pro-oriented processing lab in San Francisco. I ran the E-6 and C-41 lines - a pair of Hostert dip-and-dunk machines. Yes, we called Kodak 'Great Yellow Father' and it supplied a lot of chemistry, but the pros we serviced were increasingly using Fujichrome, especially for 35mm, and what was bringing people in the door (and differentiating us in what was then a very competitive market in processing in the city) was our Cibachrome printing.

Ilford also caught on much earlier that the B&W paper market was shifting from commercial papers to more fine art oriented stocks and finishes.

[Semilog]

Tri-X I can replace with HP5+ (which I actually prefer), but Delta 400 is not a replacement for second-generation TMAX 400. I have 500 feet of TMAX in my freezer, and it doesn't feel like enough.

To the poster(s) above who have been slagging Kodak products: have you tried the current generations of TMAX 100 and 400, especially in XTOL? They're stunningly good films. (See, e.g., this thoughtful review of TMAX 400, which after substantial experience with the film reflects my own findings in all particulars.)

The brand-new generation of Portra films is ismilarly outstanding, as is Ektar 100. These are in fact the best films of their types ever produced. Yes, the new films have different characteristics than some earlier films of the same types. Yes, TMAX and Ektar require more precise control over exposure and (for TMAX) development than some of the earlier comparable materials. But the results can be nothing short of spectacular.

Say what you will about Kodak, but their film chemists and production engineers have not, over the last decade, slackened the pace a bit. And to imply otherwise is grossly unfair, and in my opinion incorrect.

If you want to lay blame, lay it where you should: at the feet of management and the Kodak Board of Directors.

[erlik]

Kevin, it was mostly a rhetorical question. :) But thanks for the links nevertheless.

David Teo, from the timeline and vague descriptions, I guess Perez was responsible for the HP cameras, among other things, just before he came to Kodak. The main problem with those cameras was that they... weren't enough. That is, they had some nifty compacts, but their higher level cameras were simply "meh". Okay, but really not good enough. Before that, he headed inkjets which were good enough. So...

And don't forget, he had Carly Fiorina as his boss for the last four years before he came to Kodak.

And after that HP had Mark Hurd and then Leo Apotheker. This trio of CEOs seems to be what destroyed HP, if HP is really destroyed.

[Jim Mooney]

I decided a while ago to switch to Ilford films for B&W and Fuji for color. It's a shame because I like Kodak products but I'd rather support a company that's committed to it's customers and dealers. Odds are Ilford and Fuji will be supplying film long after Kodak is a fuzzy memory.

[Crabby Umbo]

Semilog...

...no quibble with the quality of current Kodak products, while I used early Fujichrome when Kodak was dropping the ball on transparency, they certainly had their own series of mis-steps, like killing a great film to replace it with Provia, a film that was every bit as stupid and "blue" as Ektachrome at the time (and which a Fuji rep openly admitted they made particularly to compete with Ektachrome, not understanding that we used Fuji because it wasn't Ektachrome!), and they had to reintroduce the original film as Astia later on.

The current Kodak transparency films are top notch, and I try to use them on jobs as much as possible, ditto for Ektar; but more and more clients are just demanding digital and won't pay for film, so who knows if Kodak can keep it up as demand dwindles...

TMAX, on the other hand, is a film I never warmed to, as well as most of my contemporaries that shot conventional black & white for years...it looks 'hinkey' compared to conventional, and reproduces half tones that to me just don't look 'right', and it needs specialized processing methodology (well, at least different then what we had been doing for years) and chemistry to look best.

The whole introduction and constant push of TMAX films has a lot to do with what is/was actually wrong with Kodak, answering a question no one was asking for the sake of marketing a new film, and then Ilford felt they had to follow suit. In the formats I used, there is no difference in sharpness, or whatever Kodak was selling in the TMAX line, at the print sizes I do, it just looked 'odd'.

[Semilog]

Crabby,

TMAX 400 does answer a real need: the need for a fast film that yields the image quality of a slower film. This is not so important if you shoot medium format. It's extremely useful if you shoot 135. Especially if you prefer to shoot at medium apertures and live in a place with short days and not a lot of sun in the winter!

I repeatedly tried -- and never liked -- TMAX 400 in the 1990s.

The current stuff is another animal altogether. I prefer it to Tri-X, HP5+, and Neopan 400.

Developed in XTOL 1+1, it approaches the look, and exceeds the resolution, of Plus-X in HC110 while providing almost two stops of additional speed. The grain is fine (rms = 10, same as Plus-X), crisp (not "oatmealy" like older TMY formulations), and has high acuity.

TMAX 400 doesn't require "special" developing methods -- just more precision. It is intolerant of slop.

For 100-speed film, I have 600 feet of Fuji ACROS in the freezer.

[Crabby Umbo]

Semilog...

...now you're making me want to try TMAX 400 to see how it's changed...altho I'm perfectly happy with Tri-X 400 120, someone mentioned on here that they pulled it, I'll have to check, as that is always what I use when I'm shooting 120...I may end up being in the market for a new 400 asa...

BTW, there seems to be some sort of lore associated and repeated with TMAX users that everyone who didn't like the film, was a sloppy processor...sorry...no difference in B&W processing at every place I've worked, all chemicals and water to within a half degree, follow meticulously the instructions for different films and their agitation needs. You're talking about sharpness, and I'm saying it's about the way it produces tones...I don't care about sharpness when I'm making 8X10 contact prints, as you mentioned, it is more for the 135 crowd...

When it comes to business talk tho, basically what Kodak did with the TMAX film, is increase their film manufacturing costs, and sell no more film to no more people...they basically split the same market pie more ways and increased the cost of the pie. Unfortunately, they had to kill some of those films, and they pulled the plug on my beloved Verichrome Pan 120. I'm sure they expected the TMAX films to be obvious winners so they could pull the plug on conventional emulsions, but when the face tones and other tonal areas looked crappy on testing the stuff, a whole lot of people just never changed...then they had to change the make-up of Polycontrast so it would reproduce the films more like a conventional print, then they had to introduce Polymax so the conventional film users had something to print on...you can see what a mess this is...business-wise, the only real way for this to work would have been to pull a "Steve Jobs", and just stop making all the other films, and say, TMAX 100 and 400 is now everything you want. Of course, there was too much competition in film back then and people would have just changed over to Ilford or Agfa.

In a way, trying to chemically 'game' film to be sharper, even tho you wreck the tonality, is like trying to stuff more megapixels on a chip, even tho you wreck the noise and color...

Anyway Semilog, you ARE getting me to try the newer TMAX 400, heck, if I like the tonality, I'm using it!

[Mike Johnston]

"heck, if I like the tonality, I'm using it!"

Crabby,
Tri-X 400 120 is unimprovable IMHO.

Mike

[Crabby Umbo]

Sniff, I fear you is correct, but I'm gonna try it and see if Semilog is blowin' smoke...I always like to try new stuff, tho, don't want to get old and even more crabby...especially if they're really pulling the plug on TX400 120! That would be baaaad....

[David Luttmann]

Maybe Kodak could come up with a line of professional DSLRs again, as well as well desogned cosnumer DSLRs. And toss in a nice mirrorless system as well. Instead, we get $40,000 MF chips and curddy consumer point and shoots.

[Semilog]

One piece of advice: TMAX 400 does not have a rounded shoulder and will just keep accumulating density in the highlights. Expose and develop accordingly.

[Semilog]

...and, I should emphasize, I'm shooting TMAX solely in 135 format. In medium format I'd probably be shooting HP5+ or Tri-X, just like everyone else.

[Simmerhead]

This will be one for the history books... I'm just waiting for more giants to follow suit. Arrogant corporate management out of touch with reality and the craft which is the core of their business has ruined a lot of great companies. There used to be a time when workers could work their way up from the floor, but not anymore. Now management is made up of booksmart MBAs making descisions based on numerical reports and statistics.

[David S.]

FYI -- Eastman Kodak up 82% today.

While we were posting you should have been buying...;)