Eastman Kodak Company has now confirmed it will offload its consumer inkjet business, touted for several years by CEO Antonio Perez as the path to prosperity in the ‘new Kodak’.
This will have little impact in Australia or New Zealand as Kodak’s local efforts to make an impact with its inkjet printers have been singularly unsuccessful.
(Kodak Australia seems to have been set the task of launching the new category of inkjet printing without being provided with an advertising budget, virtually guaranteeing it would fail. Eastman Kodak kept all its ad spend in the US market.)
‘The company expects that this decision, which stems from the its recently announced strategy to focus on its commercial, packaging and functional printing solutions and enterprise services businesses, will significantly improve cash flow in the US beginning in the first half of 2013,’ stated the EK press release.
It went on: ‘As a result of the decision, the company currently expects to incur total charges of approximately US$90 million, including US$20 million of charges related to separation benefits, US$32 million of non-cash related charges for accelerated depreciation and asset write-offs, and $38 million in other cash related charges associated with this action. The company estimates that approximately US$9 million of the total charges for separation benefits will require cash expenditures and that the remainder will be provided in the form of special termination benefits from the company’s defined benefit pension plans.’
The Kodak inkjet printer strategy, ushered in by ex-HP inkjet head honcho Perez, was to somehow undermine the dominance of Canon, HP and Epson in the category by selling more expensive printers with cheaper cartridges. This was supported by an acutely critical comparative marketing campaign to create consumer animosity towards the high price for cartridges charged by the incumbents.
The main flaw in the strategy was that the purchase price of Kodak inkjet printers was considerably higher than competing models, so that customers wouldn’t actually break even and begin to enjoy the economies of cheaper cartridges until they had consumed a year or more’s worth of ink and paper.
While the other inkjet printer businesses had finessed the cheap printer/expensive inks model over many years, Kodak arrogantly thought it could turn the model on its head.
Had Kodak been any real threat to Canon, HP, etc, all they would have had to do to protect their market shares and destroy the Kodak strategy was temporarily drop the price of their cartridges or further slash the price of hardware. However, Kodak was never successful enough to prompt such a move. Instead of changing the inkjet printer paradigm, Kodak was an irrelevancy in the marketplace from start to finish. Hundreds of millions have been squandered in the process – yet Mr Perez remains at the helm.
When the story is written of how Kodak has been destroyed – not by digital technology, but by its own senior management – this breathtakingly stupid plan demands a chapter to itself.
– But enough of reality, let’s hear what the architect of Kodak’s entry and then exit into inkjet printing volunteered in making the inkjet printer announcement:
‘Kodak is making good progress toward emergence from Chapter 11, taking significant actions to reorganise our core ongoing businesses, reduce costs, sell assets, and streamline our organizational structure,’ said Mr Perez,.
‘Steps such as the sale of Personalized Imaging and Document Imaging, and the Consumer Inkjet decision, will substantially advance the transformation of our business to focus on commercial, packaging and functional printing solutions and enterprise services. As we complete the other key objectives of our restructuring in the weeks ahead, we will be well-positioned to emerge successfully in 2013.’
Perez’ patent sale fails, too
The latest Perez master plan for Kodak, the sale if its portfolio of patents, also appears to have failed.
Kodak delayed the auction’s final date four times before postponing it indefinitely in late September. The company has been trying to sell its patents since mid-2011, well before it filed for bankruptcy protection in January.
Kodak had initially hoped to sell the entire portfolio at the auction in August. Bids came in around US$150 million to US$250 million, according to a report in the Wall Street Journal – less than a tenth of the US$2.6 billion Kodak said the patents could be worth.
Alternatives to selling the 1100 patents include keeping the intellectual property and creating a new licensing company to try to raise money for creditors.
Top execs jump ship
The WSJ reports that creditors have ‘called for management changes, specifically for chief executive Antonio Perez and chief financial officer Antoinette P. McCorvey to resign.’
Mr McCorvey is leaving the company, as is president and former chief operating officer Philip J. Faraci.
This follows the departure in May of Chief Marketing Officer Pradeep Jotwani (also an ex-HP executive ).
Newly-announced Kodak president Laura Quatela will assume the additional role of president of Personalized Imaging (aka Consumer Photography), and is expected to stay at Kodak until that business is sold some time next year. .
Mr Perez, with very little chance of ever being employed in a senior management position again after the carnage inflicted on Kodak under his watch, seems to have hunkered down until the bitter end – and a fat golden handshake.
(See related Opinion piece.)