Is Kodak Waiting to Die?

We’ve known that Kodak has been in trouble for some time now. At the beginning of the year, the former giant filed for bankruptcy, then a month later the company ended up killing production on cameras to cut costs. It was a sad day for a company that led the digital revolution only to lag behind other makers, but that wasn’t all. In March, Kodak dumped its online photo printing service (with an impressive 75 million users) to Shutterfly for a paltry $24 million. Then, in August, Kodak quit the film business too. Now comes even more bad news: Kodak just posted a $312 million loss in the third quarter of this year.

Incredibly, that loss came despite $1 billion in revenue over that same three months. Compared to last year’s third quarter, revenue is down by 19 percent, and despite huge cost cutting measures, losses rose from $222 million. Part of those costs are due to cutting 775 jobs, which adds up to 2,800 total cuts at Eastman Kodak this year. The 132-year old firm has lost $3 billion since 2007.

The poor numbers has put even more pressure on Kodak to sell one of its last huge assets. The August announcement that Kodak was leaving film meant selling its personalized imaging (film, photo print kiosks, etc.) and document imaging (scanners) division, which reportedly is expected to produce $1.5 billion in revenue this year, or about a third of Kodak’s total projected revenue. The division was responsible for 28 percent of 2011 revenue, as is basically the most ‘Kodak’ part of the company. The division was actually profitable in the last quarter, making $10 million off $382 million in revenue. But Kodak has yet to find a buyer, and is now trying to get bankruptcy courts to allow it to delay presenting its restructuring plan, which was due October 15, until February.

So, is Kodak just waiting to die? Well, the ongoing restructuring process should help company buy time, and if you eliminate restructuring costs, Kodak’s net loss was just $139 million, a $66 million improvement over Q3 2011. But in the longer term, Kodak faces one huge issue: What is it going to make money with?

Kodak losing its film and processing arm is huge, because for most people that’s what makes Kodak what it is. (It’s also, you know, responsible for a third of the company’s revenue.) But that’s exactly the problem, isn’t it? People still think of Kodak as a film company, not as a camera company or even an imaging firm. Kodak allegedly has a huge treasure trove of imaging-related patents, but it’s struggled to make money off of it. What’s left? For the moment, a few vestiges of its photo business, like memory cards and photo accessories, and business-to-business imaging. Meanwhile, at a huge photo expo in New York last week, the only new thing Kodak had to share was an app for finding film that is apparently terrible.

Meanwhile, Canon and Nikon dominate the high-end DSLR market that Kodak market, digital medium format is increasingly accessible, and the consumer and prosumer market is flooded with an incredible deluge of formats, body styles, and lens options. Film isn’t dead, and it’s been successfully supported in its new more art-driven role by outfits like Lomo, not to mention the fact that even Kodak was profitable in that space.

But every year that passes means another year that Kodak lags behind the cutting edge of digital, and another year for old patents to get older, while other companies race to create space for themselves in the market. (A good example is Sony, which has had trouble encroaching on Canon and Nikon on top-flight DSLRs, but has partially made up for it by selling its sensors to both companies.) Meanwhile, the market for high-grade, quasi-affordable video cameras is booming, with the 4k video market seeing a ton of new entries following RED’s splash a few years ago.

The real question is where Kodak can fit in. It has an enormous amount of brand equity, yes, which is why it’s managed to survive with cheap point-and-shoots for so long. But barring an immense amount of innovation, it’s hard to see Kodak trying to launch a new camera system now, especially considering how crowded the space is. It’s extremely hard to convince people to switch systems when you can’t bring your lenses over, unless Kodak does something similar to how it first got into digital cameras and build bodies using other people’s mounts. Even then, why buy a Kodak now rather than a Lumix or an X-Pro?

Kodak’s imaging and printing arm for businesses does have potential, but rebuilding the company around that sounds like turning Kodak into Kinko’s. “Since our Chapter 11 filing in January, we have focused on the businesses that are core to our future strategic direction and exited businesses that were unprofitable,” Kodak CEO Antonio Perez said in a statement. But what that future strategic direction is remains unclear. At this point, I think there are two routes for Kodak to take: Hold on to its film business and all those photo-printing kiosks, which is making money, and try to get people to treat photos like photos again. (If Kodak partnered with Instagram to print online shots in square format on real stock, people would go bananas. The current option of using a second app to print from an inkjet is chintzy.) The other option is for Kodak to quit photos altogether and work on more obscure aspects of imaging. That might keep the company alive, but a Kodak without photos just wouldn’t be Kodak any more.

Top image: Reuters, via IB Times

Follow Derek Mead on Twitter: @derektmead.