Kodak’s moment is over

It is a bad sign when a company gets more attention for dropping a 74-year-old product than for anything else it has done recently. Eastman Kodak’s decision to cease production of Kodachrome film is a mere blip financially speaking in the decade-long decline of traditional photography, but it is a snapshot of a company that has managed change badly.

Many once great companies grapple with technological obsolescence. But few destroy as much value in the process. Kodak began investing in digital photography in the mid-1990s after pioneering and then ignoring the technology to avoid cannibalising traditional film. In the past decade, however, it has ploughed 10 times as much into research and development as its current market value. To be sure, today’s chief executive Antonio Perez and predecessor Daniel Carp talked a good turnround game, luring in savvy value investors such as once-legendary Bill Miller of Legg Mason who saw an iconic company at bargain prices. It still holds almost 15 per cent of Kodak, which has seen its shares drop 97 per cent in 10 years amid ejection from the Dow Jones Industrial Average.

Last quarter’s digital sales fell almost as fast as traditional film, both about 30 per cent, forcing a dividend freeze and layoffs. Used to dominating its industry, Kodak’s remaining competitive advantages are its brand name and the dwindling free cash flow from film plus some snazzy technology. Its newer products such as cameras and printers face far nimbler competitors than in its heyday though. The cash flow from Kodak’s declining film business helped mask this weakness, but it now faces financial strains and must play to its strengths. If any company should understand the need to focus it should be Kodak.

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