End of an Icon: Kodak Prepares to File For Bankruptcy

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News Posted: Thu, Jan 5 2012 2:30 PM
Its products defined nearly a century of photography, cinema, and home video, but the venerable Kodak company is on the verge of bankruptcy. While the company is reportedly preparing to file a Chapter 11 bankruptcy, which permits restructuring, the firm is caught in a merciless slide.

Once so synonymous with film that its products coined the phrase "Kodak moment," the Rochester, NY-based corporation lost 95 percent of its value between 1999 - 2000. Revenue for 2010 was just $7.18 billion, down from 1996's $15.97 billion. It's stock, which traded at $30-35 per share back in 2006-2007 has fallen to 44 cents as of this writing; the company has been warned that it faces de-listing from the NASDAQ if share prices don't recover to at least $1.

The company's long, slow fall into irrelevancy was caused by its executives consistently failing to recognize the disruptive nature of new companies and technologies. The flaw first showed when Kodak turned down sponsoring the 1984 Olympics. Fujifilm, a cheaper Japanese company, jumped at the privilege, and picked up a 17% share in the US photography market by the late 1990s as a result.


The iconic Kodak building in Rochester, NY

Kodak failed to take digital photography seriously when the technology emerged, believing that Americans would never opt for digital cameras over traditional devices. For a few years, this remained true; early digital cameras were bulky, slow, and took remarkably terrible photos. When it became clear that digital cameras were going to be a major force in the market, Kodak jumped in--but failed to recognize how quickly the devices would become commoditized. In 2001, Kodak was losing $60 per camera sold, even as its film business shrank.

Kodak has attempted to compete more effectively in recent years with a hare-brained attempt to leap into the printer and digital picture frame businesses, both of which feature razor-thin margins and products of dubious quality. Neither move has been very successful. After divesting its manufacturing assets and firing over 20,000 people in the past seven years, the company hit on a last-ditch strategy for success:  patent litigation.

The move paid off in 2010, when LG agreed to an $838M payment for patent licensing, and went nowhere thereafter. Kodak has been shopping its patent portfolio around since the summer of 2011, but has yet to find a buyer. Kodak is reportedly eying bankruptcy as a means to purge itself of obligations to fund retiree pensions, the cost of which makes it unattractive to possible buyers.

The larger problem Kodak faces is that the majority of the company's value is tied up in iconic brand recognition and its patent portfolio. Persistent failure to recognize and adapt to changing market conditions has led to a situation where the US corporation with more historic expertise in visual image technology than any other now has nothing to contribute to a medium it was instrumental in creating. As the Wall Street Journal writes:  "This company failed long ago."
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timaeus replied on Thu, Jan 5 2012 3:18 PM

"...the Rochester, NY-based corporation lost 95 percent of its value between 1999 - 2000."

Is that right? 95% of it's value in a single year?

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NPirce replied on Thu, Jan 5 2012 7:44 PM

the rapid rise of digital photography destroyed Kodak's market

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OSunday replied on Thu, Jan 5 2012 7:58 PM

No more Kodak moments?! :O

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News:
Kodak is reportedly eying bankruptcy as a means to purge itself of obligations to fund retiree pensions, the cost of which makes it unattractive to possible buyers.

The Dirty Dogs don't want to honor their obligations to their retirees? They couldn't pull their heads out of their ~dark places~ and now, because of their mismanagement, their past employees get to eat dog food. They deserve to perish. Good Riddance.

Dogs are great judges of character, and if your dog doesn't like somebody being around, you shouldn't trust them.

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It's sad that Kodak will now become one of those business school case studies. Stuck in the "don't run your business like this" category.

I'm with realneil. That really is an underhanded move by management to punish employees for its mistakes, but unfortunately it's becoming common.

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AKwyn replied on Fri, Jan 6 2012 2:57 AM

Shame... Kodak was a memorable brand and while they may not have gotten the recognition they deserved recently; they still made good products. I suppose Kodak's failure should be a lesson to all that you have to advance quickly if you want to make it in this business.

 

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GEgan replied on Fri, Jan 6 2012 4:14 AM

Finding a way to get out of paying retirees' pensions? That's horrible. Those people paid, and did the time, with the expectation of a retirement strategy. Why do I think that the executives will all have retirement golden parachutes if the deal goes through? Disgusting. End of an era? GTFO Kodak. You suck ass.

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It does not even require a full read of this article to realise that Kodak have been very slow to adapt to new technologies. Considering what their market share was they either had very poor advisors or they decided to be arrogant.

Let’s hope workers are not screwed out of their pensions. Can you picture that with a Kodak?

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RConlee replied on Fri, Jan 6 2012 9:43 AM

There is something to be said about such a pending failure. You would think that they would just sweep in on fuji and drive them.from the.film market. At the end of the day, their film products are excellent, and make good prints. Digital cameras take way better images than before, but 0's ans 1's don't react to true colors like chemical imaging mediums do. In conclusion, Kodak should have stuck to what they do best, corner an otherwise dying film market and save digital camera innovations for the next generation. I hope those people that worked for Kodak will get their pensions. Back in the day, Kodak was the place to work in Rochester. They paid well, treated their employees well, and in effect ran the city through positive leadership. To see what kodak's downfall has done to Rochester, look no further than Schenectady (GE) or Detroit for that matter.

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Colework replied on Tue, Jan 10 2012 11:22 AM

Did you read the article? Corner a dying market? The death of film and rise of digital is why Kodak is where it is.

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Wow, they ONLY took in $7.18 BILLION dollars last year, i can totally understand how they wouldnt be able to afford fulfilling their contractual obligations and paying out their employees pensions :rolleyes:

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