Kodak to shutter camera business

Thu Feb 9, 2012 5:18pm EST

A Kodak Retina camera is seen in a photo store in London January 19, 2012.  REUTERS/Stefan Wermuth

A Kodak Retina camera is seen in a photo store in London January 19, 2012.

Credit: Reuters/Stefan Wermuth

(Reuters) - Eastman Kodak Co EKDKQ.PK, the inventor of the digital camera, plans to get out of that business in the first half of the year as the bankrupt company looks to cut costs.

The decision to stop selling digital cameras along with pocket video cameras and digital picture frames marks the end of an era for Kodak, which also invented the handheld camera.

Kodak, which filed for bankruptcy protection last month, said on Thursday that getting out of cameras would result in "significant" job losses. Most of the 400 people in that business are based in Rochester, New York, and work in research and development and marketing.

The news comes as Kodak meets obstacles in another cost cutting move tied to its illustrious past. The company will be unable to end its 20-year sponsorship of the Hollywood Theater that hosts the Academy Awards before this year's Oscars.

Along with its reputation for making easy-to-use cameras for consumers, Kodak is also famous for its camera and photographic film contributions in movies.

Now, instead of designing its own cameras, Kodak will try to license its brand to other camera makers, several of which have already expressed "significant interest," said spokesman Christopher Veronda.

Kodak, which as recently as 2006 was one of the top three digital camera makers in the world, will stick with its desktop printer business, on which it has focused more recently.

"The printer initiative took over (in the last decade), and they took their eye off the ball in the camera and camcorder space," said IDC analyst Christopher Chute.

However, even in printers, Kodak is far from the top of the pile. It still lags in sixth place in the U.S. market despite being the only brand to grow in the double-digit percentage range in the last two years, according to NPD Group research. The U.S. printer market is led by HP (HPQ.N), Epson and Canon.

Kodak, which opened for business in 1880, also invented digital cameras with Wi-Fi connections and touch-screens as well as docking stations that made it easy to transfer photos to computers, according to IDC's Chute.

These were among the products that gave Kodak a 10 percent market share in 2006, behind Canon (7751.T) and Sony Corp (6758.T). By 2010 it had dropped to seventh place behind rivals like Nikon (7731.T) and Samsung Electronics Co (005930.KS), according to IDC.

But as the quality of digital cameras in cellphones improved, stand-alone cameras' relevance became somewhat limited to the higher-end market, where Kodak did not compete in recent years.

The company will take a charge of about $30 million to leave the business. It expects the exit to generate more than $100 million in annual operating savings.

The charge does not include additional costs that Kodak expects to incur for actions such as ending manufacturing contracts with overseas companies that make its products, Veronda said.

Kodak -- which once employed more than 60,000 people -- has not disclosed its employee numbers since the end of 2010, when it announced that it had a work force of 18,800. Today's employee base is smaller than that, according to Veronda, who said the company would update the number soon.

FROM HOLLYWOOD TO INKJETS

Kodak came under pressure from investors because margins are higher for products such as photography film and printer ink cartridges, which consumers buy far more frequently than cameras.

"As a business entity, their focus was always on consumable businesses, and rethinking how you sell (camera) hardware that only sells every few years is a very different kind of business," NPD analyst Stephen Baker said.

"Getting out of a market that's declining rapidly ... is probably a good idea," said Baker who estimated that U.S. camera sales had fallen about 20 percent in 2011 from 2010.

Before the digital age, Kodak cameras included the Brownie -- launched in 1900 with a $1 price tag -- and the Instamatic, which was launched in 1963.

A Kodak camera was used on the Apollo 11 mission in 1969, according to the company. And NASA said that a Kodak camera was used by the astronauts to film lunar soil from only inches away.

Kodak film has been used on 80 movies that have won Best Picture Oscars, according to the company.

In a stark move away from its more glamorous past however, Kodak recently had to ask for permission to end its 20-year Hollywood Theater sponsorship, worth $72 million. However, it was told in a filing late Wednesday that it could not get out of the deal ahead of the Feb 26. Oscars ceremony.

"The invitations and advertisements for the 2012 Academy Awards show are out. They cannot be recalled," CIM Group, the owner of the theater said in a court filing.

Kodak said on Thursday that the move out of cameras was the "logical extension" of its recent plan to improve margins in the camera business by narrowing its product portfolio, geographies and retail outlets.

The company, which depends on digital technology for three-quarters of its revenue, plans to continue to offer online and retail photo printing as well as desktop printers.

Remaining consumer services will also include retail-based photo kiosks and dry lab systems. Kodak said it has more than 100,000 kiosks and order stations for dry lab systems around the world.

Besides its consumer businesses segment, Kodak has a commercial business that includes enterprise services, graphics, entertainment and commercial films units.

The company promised to honor all related product warranties, and provide technical support and service for its cameras, pocket video cameras and digital picture frames.

(Reporting By Sinead Carew in New York; Additional reporting by Liana B. Baker and Susan Zeidler; Editing by Dave Zimmerman, Derek Caney, Lisa Von Ahn and Bernard Orr)

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Comments (1)
BrianKeesbury wrote:
It is a sad sad day when Kodak quits making cameras. But after my recent search for a new camera and finding that didn’t offer a camera with all of the options that I was searching for, it is almost no wonder. It is completely surprising that a company with a robust a portfolio as Kodak has isn’t able to keep up with the times and compete with the newcomers in the business. Hopefully they will rebound from this and re-develop (pun intended) their camera business into something truly spectacular.

Feb 10, 2012 12:37am EST  --  Report as abuse
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