Kodak to shutter camera business

Thu Feb 9, 2012 7:32pm GMT

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

A Kodak filter box is seen in a photo store in London January 19, 2012.

Credit: Reuters/Stefan Wermuth

Quotes

   

(Reuters) - Eastman Kodak Co, 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.

The company was one of the biggest corporate casualties of the digital age as it failed to quickly embrace modern technologies such as digital photography, which it invented in 1975.

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.

Instead of designing its own cameras, Kodak will now 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.

The company, which began 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 Chute.

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

But as the quality of digital cameras in mobile phones 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 (18 million pounds) to leave the business. It expects the exit to generate more than $100 million (63 million pounds) 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.

CAMERA VS. PRINTER

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 Kodak's unit camera sales fell about 20 percent in 2011 from 2010.

Kodak said the latest decision 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, and 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 honour 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 and Lisa Von Ahn)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.