26 September 2003 Eastman Kodak has announced that it is preparing a strategic move away from the production of traditional magnetic film in favour of new digital-based products.
The move has been sparked by the continued decline of traditional photographic products and the fact that digital photography has been eating into the company’s core film business much faster than previously anticipated.
Part of the shift away from traditional film will include the launch of a new range of consumer-based ink-jet printers, a market where Kodak has tried and failed to make an impact in the past.
However, Kodak’s strategy is expected to take several years to achieve and will put it in direct competition with Hewlett-Packard, Canon and Seiko Epson in the fiercely competitive consumer printer market.
Kodak will also expand its product line in the high-end digital printing market, which is currently dominated by Xerox and HP.
While Kodak plans to make no more significant long-term investments in traditional film, it will begin making private-label film to be sold under non-Kodak brand names outside of the US. This is a significant move away from its previous strategy of using its premium brand to maintain high product prices.
The strategic shift will be funded in part by a cut in dividends from $1.80 to 50 cents. This is expected to give the company $1.3 billion in extra cash to invest in the new projects.
Kodak will also borrow about $1 billion to help fund its new ventures. The investment is based on the anticipation that its new digital business, currently loss-making, will grow to 60% of revenue by 2006, while traditional film revenues will drop to 40%.
But creating the new Kodak will require some hard business decisions to be made.
The company has suggested it will sell or close about $1 billion in ancillary businesses, including its slide-carousel business. Kodak officials also signalled that more cost cutting is on the way. The company has already laid off 30,000 workers since 1997 and is shifting much of its manufacturing overseas, including its entire disposable camera operation.
