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Kodak to delete its digital device division

Photonics Spectra
Mar 2012
Ashley N. Paddock, ashley.paddock@photonics.com

ROCHESTER, N.Y. – The company that created the first digital camera said it will phase out its digital device business in the first half of this year.

“For some time, Kodak’s strategy has been to improve margins in the capture device business by narrowing our participation in terms of product portfolio, geographies and retail outlets,” said Pradeep Jotwani, president, Consumer Businesses, and Kodak chief marketing officer.

Troubled Eastman Kodak Co., which filed for bankruptcy on Jan. 19, said the phaseout will save it more than $100 million a year.

The 132-year-old company, which once controlled the photographic film market, has been on a slow, painful decline for years, closing 13 manufacturing plants and 130 processing labs and reducing its workforce by 47,000 since 2003. It lost 88 percent of its value last year. At its peak in 1997, Kodak’s stock was valued at nearly $30 billion. Today it stands at less than $145 million, according to The Wall Street Journal.

Shortly before filing for bankruptcy, the company said it was cutting its business segments from three to two to reduce costs.

In 1975, Kodak employee Steven Sasson developed the first digital camera prototype, which weighed eight pounds and was about the size of a toaster. Over the next three decades, Kodak amassed a portfolio of more than 1100 digital imaging patents.

The company has had no luck trying to find a buyer for those patents, which it said have generated more than $3 billion in licensing revenue since 2003. Kodak also filed a number of suits in January against companies such as Apple, Research in Motion Ltd. and Fujifilm Corp. for infringing those digital patents.

Kodak’s potential demise was on the minds of many at SPIE Photonics West 2012, held in January in San Francisco.

“The collapse of one of our industry giants should be of concern to all of us,” said Robert Edmund, CEO of Edmund Optics at an executive panel on optics and photonics. “There are lessons here for all of us.”

Michael J. Cumbo, president of Idex Corp.’s optics and photonics platform, began his career at Eastman Kodak. He said that the company didn’t move fast enough to capitalize on its digital technology because it was reluctant to render obsolete its photographic film business, which had a profit margin of 75 percent.

“Kodak’s failure had lots of reasons, not just a lack of ability to manage products,” said Ken Kaufmann, vice president of marketing at Hamamatsu. He added that, as a major employer in a small town, Kodak had an “ethical and moral responsibility” to keep employees.

The economy of Rochester is much more diverse than it was in the early 1980s when it relied on Xerox, Kodak and Bausch & Lomb for the majority of employment opportunities, said Duncan Moore in a Rochester Democrat & Chronicle op-ed piece in February. He is vice provost for entrepreneurship and the Rudolf and Hilda Kingslake Professor of Optical Engineering at the University of Rochester. While Kodak shed 54,000 jobs over the past three decades, the community gained a net of 100,000 jobs in industries such as manufacturing, business, services, construction and higher education.

The University of Rochester, with its medical center, is the area’s largest employer, Moore said and, since 1996, 51 startups have been created based on the university’s technologies.

The challenge now is to head off a “brain drain” of twenty-somethings out of the area, Moore told Photonics Spectra.

“Both Kodak and Xerox had national recruiting of twenty-somethings to Rochester,” Moore said. “That’s not happening now. The challenge as a community is how do we get the 70,000-plus students in the area universities to embrace our area and stay?”


GLOSSARY
digital camera
A camera that converts a collected image into pixels that are black or white digital or shades of gray. The digital data may then be manipulated to enhance or otherwise modify the resulting viewed image.
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