Kodak, one of the pioneers of the photography world, is on the brink of bankruptcy and may file for Chapter 11 protection in the coming weeks. Kodak was for so long the giant of photography, but has floundered recently, unable to capitalize on new technology. Kodak has been falling slowly for some time ever since foreign competition started to overtake the digital camera market. In fact, over the last twelve years Kodak’s stocks have fallen 95% and an additional 80% in 2011, and were listed at an all time low, with shares trading at just $.47. Add to that nine quarterly losses over the past three years, including a $222 million loss third quarter of 2011, and the outlook is grim.
Just how far has Kodak fallen?
It has been compared to the Google or Apple of the past, holding a near-monopoly in the industry, able to give its employees consistent bonuses during “wage dividend days,” in which the company would share its large dividends with its employees. Kodak’s corporate headquarters featured an on-site basketball court and movie theater, and the company even created the first digital camera in 1975.
However, Kodak hit struggles in the 1980s from competing firms in the film industry and failed to capitalize on their digital camera breakthrough, instead focusing on traditional film and even venturing into clinical diagnostic supplies such as blood serum analyzers. Recently Kodak has focused on printers, and according to IDC, ranks fifth among major players, with a 2.6% market share. In 2003 competition was so strict Kodak announced it planned to stop investing in film altogether. Kodak is not the first former major player to file for bankruptcy, as Polaroid filed for bankruptcy in 2008 and former video giant Blockbuster followed suit in 2010.
What does this type of protection entail?
Chapter 11 protection allows for the continued day-to-day running of operations but with oversight from a committee of creditors acting as the board of directors. Stockholders shares fall to zero and retirees’ pensions may no longer be protected. Though Kodak stated that it had “no intention of filing for bankruptcy,” the issues that come with filing for Chapter 11 protection, namely the hesitation of potential banks and investors, makes operations that much harder.
Kodak’s best hope is to sell a portfolio of patents for around $ 2 billion to $3 billion, but since they were first shopped in July there have been no bids despite “active interest from a number of potential buyers,” according to CNN. Kodak CEO Antonio Perez was more hopeful about his company’s future, telling the Wall Street Journal, “In relation to the recent speculation in the marketplace about the future of Kodak, I want to note that I have a high degree of confidence in our ability to execute this plan. By the end of 2012, we’re going to get to this self-standing digital company.”
Whatever the case is, the plight of Kodak is just the latest in an increasingly dramatic shift into the future of photography and videos. Like Polaroid and Blockbuster before it, Kodak was left in the dust of a shift to everything digital. What was once a giant of the industry now may be no longer.
The age of film has come to an end and with the inability to adapt to a changing industry, Kodak is left to try to find its way out of its mess. For this once-perennial power to rebound, it must innovate or find itself no longer able to function.
Photo Credit: rachelcreative
About Jack Hopper
Jack Hopper covers finance and politics for NBR. Besides NBR, he is also Internal Affairs Chair at Ayers CCI.
