In Kodak's troubles, a snapshot of an icon's fall
ROCHESTER, N.Y.—Buffeted by foreign competition, then blindsided by a digital revolution, photography icon Eastman Kodak Co. is fighting for survival after a quarter-century of failed efforts to find its focus.
The 131-year-old company that turned picture-taking into a hobby for the masses and became singularly synonymous with capturing memories has tried to bat down sudden talk of bankruptcy. But concern about its grim prospects has hit fever pitch after it enlisted a legal adviser to explore ways to revive its sagging fortunes.
The collapse of such a legendary brand would not only reverberate through American business, but would also have a profound cultural effect on generations worldwide who took their first snapshots with film cameras bearing the unmistakable yellow-and-red K logo.
"You could look up and see that yellow sign all over the world -- no matter where you went, people depended on that for their memory-recording," said photography writer John Larish, who worked for Kodak in the 1980s as a senior market-intelligence analyst.
"With the advent of digital or even cell-phone cameras, Kodak wasn't in the game," he said. "I see the company now as something we will write about in history books."
Already jittery shareholders were rattled Friday when word leaked out that Kodak has hired Jones Day, a law firm that dispenses advice on bankruptcies and other restructuring options. Its stock, which topped $94 in 1997, skidded to an all-time low of 78 cents a share.
After markets closed, Kodak insisted in a statement that it had no intention of filing for bankruptcy protection and described Jones Day as one of several advisers helping its management close out a stumbling, decade-long drive to recast itself as a digital photography and printing powerhouse. Its stock rebounded this week to $1.12.
But investor alarm about whether it has the financial wherewithal to complete its turnaround is raising the seemingly inescapable specter of job cuts -- and the threat of extinction. Kodak has already sliced its global payroll to 18,800 from a peak of 145,300 in 1988, and its hometown rolls to 7,100 from 60,400 in 1982. Employees say they're even more scared than usual that the latest crisis could sink careers that somehow dodged decades of cutbacks.
Chemist Kenny Baptiste says something other than talent and hard work has kept him in his job for 19 years.
"I call it luck -- I'm not going to sugar-coat it at all," said Baptiste, 43, who joined Kodak's research division out of college and has two young children. "I always say, I don't believe I'm better than some of the people that have gone."
Along with a rich portfolio of 11,000 patents, "we have some very innovative product ideas in the pipeline," Baptiste said. "It's not fair to think of us as finished. I don't think we're down for the count, I really don't."
The transition to a world without film occurred at lightning speed, and Kodak is still playing catch-up in securing a firm foothold in the amorphous realm of electronic media.
"It's shocking how quickly Kodak has gone to no longer being a (familiar) name in nearly every household in Western culture," said Robert Burley, a photography professor at Ryerson University in Toronto.
"I've watched this train wreck happen over the last five years and I'm still surprised at it and still trying to understand how everyone's relationship to photography is changing."
While Kodak invented the world's first digital camera in 1975, a reluctance to ease its heavy reliance on high-profit film allowed Japanese rivals like Canon and Sony to rush largely unhindered into the fast-emerging digital arena in the late 1990s.
Finally launching a four-year digital makeover in 2004 -- the year it got ejected from the 30-stock Dow Jones club -- Kodak closed aged factories, chopped and changed businesses and eliminated tens of thousands of jobs. It closed 2007 on a high note with net income of $676 million, then ran smack into the recession.
Kodak's meteoric rise to blue-chip status in the 20th century was emblematic of what American business is capable of, but technological innovation doesn't "stand still," said Mark Zupan, dean of the University of Rochester's Simon Graduate School of Business Administration.
"Of the companies in the original Dow Jones index 100, only one survives -- General Electric," Zupan said. "With the challenges companies face, it's incredibly hard to sustain being at the top of the world. We've seen Hewlett-Packard go through this, IBM was on the point of death for a while, Goodyear was near Chapter 11 and turned around, but it doesn't always work out."
Rochester was a prosperous shoe, clothing and horticulture hub of 90,000 back in 1880 when George Eastman, engrossed in an arcane art called photography, quit his bank clerk job to perfect a set of home experiments that rapidly transformed a hobby into a mass commodity. In place of heavy glass plates, Eastman devised a flexible cellulose film that he sold preloaded in box cameras. He made up the name Kodak because he liked the letter K -- "strong and incisive." Framed in yellow, it became one of the most recognizable brand names on earth.
In 1900, Eastman came out with a $1 Brownie, turning point-and-shoot photography into an overnight craze. By 1927, Kodak held a virtual monopoly of the U.S. photographic industry. And in the 1960s, its easy-load Instamatic 126 became one of most popular cameras ever, practically replacing old box cameras.
Besides making it possible for countless millions to freeze-frame their world and their memories in hand-size prints, Kodak was a corporation extolled for taking care of its own. Going to work for Kodak, known as "taking the life sentence," became a rite of passage for generations.
Eastman's munificence was equally legendary. He pumped his riches into hospitals, universities and parks, creating thousands more jobs. His name pops up around every corner here: the Eastman School of Music, the Eastman Dental Center, Durand-Eastman Park.
Entering the 1980s, Kodak still cornered nearly two-thirds of color-film sales worldwide. But excessive caution in exploiting new markets, such as point-and-shoot 35mm and single-use cameras, was taking its toll. The innovative Japanese were plundering Kodak's fat profit margins. Fuji jumped from obscurity to within a whisker of edging out $16 billion Kodak as No. 1.
Mass layoffs came every few years, testing like never before a cozy relationship of company and community that was perhaps unequaled in the annals of American business.
Bill Hargreaves, a Kodak technician for 28 years, said his father spent his entire career as a machinist at Kodak after World War II, retiring in 1971. "He was there when Kodak was the best place in the world to work," he said.
But Hargreaves opted for early retirement in 1991 just as belt-tightening was making the workplace environment "rougher and rougher each year." He worries now that his continuously clawed-back retirement package might someday vanish.
After four years of red ink, Kodak has projected crossing back to profitability in 2012 on the strength of deep investments in digital inkjet printers. Its sales have fallen to $7.2 billion.
Mining its patent portfolio has raised nearly $2 billion in licensing fees since 2008, and it is pinning its hopes on a potential $3 billion sale of its 1,100 digital-imaging patents.
The question now is whether those measures will be enough to keep Kodak afloat. The company had $957 million in cash as of June 30, down from $1.6 billion in January.
One telling measure of its demise is "the Kodak trademark doesn't carry the weight it did," Larish said. "The last couple of generations know Sony, even LG and Samsung, but they don't know Kodak. Kodak is not the first name in imaging anymore."