The Final Kodak Moment

Posted by · February 9, 2012 12:35 pm

Surely this morning marked the end of an era. After the continual struggle to keep its head above water that has proceeded since filing for bankruptcy last month, Kodak made an announcement Thursday that the company will be discontinuing its “dedicated capture devices business.” More specifically, Kodak plans to phase out the production of digital cameras, pocket video cameras, and even its digital picture frames by mid-2012.

“For some time, Kodak’s strategy has been to improve margins in the capture device business by narrowing our participation in terms of product portfolio, geographies and retail outlets,” commented Kodak CMO Pradeep Jotwani. “Today’s announcement is the logical extension of that process, given our analysis of the industry trends.”

Once these devices are completely phased out of Kodak’s offerings, the company believes that it will recover an annual operational savings of at least $100 million. As for the cost of eliminating its camera business, Kodak will incur a $30 million charge for eliminating the business, which will obviously result in severe layoffs in its already shrinking employee base.

While these kinds of costs are predictable anytime reorganizations like this take place, the most devastating cost to the 131-year-old company will be the incalculable impact made on its iconic brand, which the company will arguably have a difficult time maintaining as it shifts its focus to desktop printer production and photo printing services. Other than that, the remaining vestige of Kodak’s historic brand will be in the planned expansion of the company’s brand licensing program, which has reportedly already drawn the interest of several camera makers.

But the decline of what was once one of the world’s most powerful companies was not as sudden as this announcement might make it seem. Despite being the inventor of the first digital camera in 1975, Kodak has simply appeared unable, or unwilling, to keep up with the pace of modern technology in digital photography. As a result of losing share in critical markets to more forward-looking companies like Fuji, Kodak ultimately found itself in a predicament so serious that it had little choice other than to file for Chapter 11 bankruptcy last month. And as a part of its bankruptcy agreement, Kodak agreed to begin a court-supervised auction of its stockpile of digital imaging patents, whose total value has been estimated to be in the range $1 billion.

While this move by Kodak undoubtedly came as a shock to many, the company’s continual decline in a market it once dominated seems to make the “retreat, reorganize, rebuild” strategy the final remaining opportunity to revive the company whose name has become inextricably linked to the moments we cherish.