Kodak goes bankrupt
By Andrew Hudson Published: January 20, 2012 Updated: September 1, 2016
The venerable Eastman Kodak Co. filed for Chapter 11 bankruptcy protection yesterday. Once the world’s biggest camera maker and photo film supplier, Kodak had lost its way in a world it helped create.
“After 132 years [Kodak] is poised, like an old photo, to fade away.”
— The Economist: The Last Kodak Moment
Led by an executive from HP, Kodak hopes to emerge as a provider of commercial and consumer inkjet printers. But that strategy has yet to be profitable and the company may be sold for its patent and real-estate holdings.
“We will now be well-positioned to complete our transformation.”
—CEO Antonio Perez, who joined Kodak from HP in 2003.
Kodak was founded in 1889 by George Eastman. Wanting a short and distinctive brand name, Eastman created the name Kodak with his mother using an anagram set and a preference for the letter “k” which he considered “a strong, incisive sort of letter.”
A high-school dropout from rural New York who worked in a bank, Eastman almost single-handedly created amateur photography by inventing cheap and portable cameras and film. Eastman Kodak’s list of photography firsts is, and probably will be, unsurpassed:
- 1884: The first cameras suitable for non-expert use.
- 1885: Roll-film, the first flexible photographic film and the basis of movies.
- 1888: The Kodak camera, the first camera for consumers, starting amateur photography.
- 1900: The Brownie camera, a simple camera which initially cost only $1 and created a new mass market for photography.
- 1935: Kodachrome, the first more portable 35mm color film.
- 1975: The first camera, developed by Steven Sasson, an electrical engineer at Kodak.
- 1986: The first megapixel sensor, capable of recording 1.4 million pixels and producing a photo-quality 12.5 x 17.5 cm (5×7 inch) print.
- 1992: PhotoCD, the first low-cost system to scan and store photos in a format.
- 2003: The Kodak EasyShare LS633 Camera, the world’s first camera to feature a full-color, active-matrix organic light-emitting diode display.
From its inception, Kodak dominated the American photography industry.As late as 1976, Kodak commanded 90% of film sales and 85% of camera sales in the U.S., according to a 2005 case study for Harvard Business School. By 1988, Kodak employed over 145,000 workers worldwide.
1996 was the peak year for Kodak. The company had over two-thirds of global market share. Kodak’s revenues reached nearly $16 billion, its stock exceeded $90, and the company was worth over $31 billion. The Kodak brand was the fifth most valuable brand in the world.
Despite helping invent and lead the photography revolution with cameras and services, Kodak never found a cash-cow to replace film. Since 2003, Kodak has shed 47,000 jobs, 13 manufacturing plants and 130 processing labs. It has not made an annual profit since 2004 and its cash reserves were soon depleted.
“Since 2008, despite Kodak’s best efforts, restructuring costs and recessionary forces have continued to negatively impact the company’s liquidity position.”
—CFO Antoinette McCorvey, in the bankruptcy filing, January 19, 2012.
“Kodak CEO Antonio Perez is known for his charisma, but some of his spending decisions have raised eyebrows. Perez’s liberal use of corporate jets has become a popular topic among Kodak pensioners on Internet message boards. .. [He] flew with his wife in 2006 on a Kodak plane to a Super Bowl football game viewing party at the White House. .. In 2010, he racked up a $309,407 bill using Kodak’s jet for personal travel, according to regulatory filings.”
In July 2011, Kodak started trying to sell its many patents but found no immediate buyers. On January 19, 2012, Kodak chose to enter Chapter 11 bankruptcy and its formerly blue-chip stock was delisted from the New York Stock Exchange.
“Now we must complete the transformation by further addressing our cost structure and effectively monetizing non-core I.P. assets.”
—CEO Antonio Perez in a news release
In its bankruptcy filing, Kodak declared $6.8 billion in debt and $5.1 billion in assets. Potentially the most valuable and liquid assets are its stable of 11,000 photography patents, which may be worth around $2 billion. Suitors may include Google, Apple, or Samsung, companies that Kodak is currently fighting with patent infringement lawsuits.
The big plan is for Kodak to dominate on-demand printing, the way it did with photographic film.
“Bankruptcy makes it easier for Kodak to sell assets to pay for layoffs, U.K. and U.S. employee pensions and health-care benefits, and providing capital needed to install a big enough base of printers to eventually be profitable. The plan is to place printers with high volume users today — sometimes at a loss — and profit from ink and service sales tomorrow. The strategy to date has cost more money than it has made.”
To stay in operation, Kodak will borrow an initial $650 from Citigroup. But the bankruptcy judge has set several deadlines. Kodak has until June 30, 2012 to submit bidding procedures for the patents, and until February 15, 2013 to submit a reorganization plan.
Good luck, Kodak.Next page: Street photography and the First Amendment