Poll: Kodak headquarters will leave

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More than 70 percent of RBJ Daily Report readers think it is very or somewhat likely that Eastman Kodak Co.’s headquarters no longer will be in Rochester five years from now, the latest Snap Poll shows.
Roughly 60 percent think Kodak is on the track to sustained profitability and revenue growth, but 40 percent think its strategy is not likely to work.
“The better question is whether Kodak will be relevant five years from now. Kodak originally thrived on development of new technology and bringing that technology to the market. That aspect of business seems to be sadly lacking,” wrote Al Hinkle of Seagate Alliance.
Forty-one percent of readers said they are less optimistic about Kodak’s future than they were a year ago.
“It seems to me he sold off the wrong division,” wrote poll respondent Rick Corey of Kodak CEO Antonio Perez. “He should have kept the health sciences division, which has higher margins and a less fickle marketplace.”
Roughly one-quarter of respondents feel the same as they did a year ago, and 32 percent are more optimistic.
“I think Mr. Perez is turning the ship around. I look forward to seeing what Kodak does next,” wrote Katharine McMahon of Mirror Show Management.
More than 400 people took part in the poll, which was conducted Feb. 12 and 13, and 84 submitted comments. (To read some of them, see below.)
Here are the detailed results to this week’s poll questions:

In your opinion, how likely is it that CEO Antonio Perez’s strategy will return Kodak to sustained profitability and revenue growth?
11% Very
48% Somewhat
31% Not very
10% Not at all

Compared with a year ago, today are you more or less optimistic about Antonio Perez’s strategy to transform Kodak?
32% More
41% Less
27% Unchanged

In your opinion, how likely is it that—due to merger, acquisition or relocation—Kodak’s headquarters no longer will be in Rochester five years from now?
36% Very
36% Somewhat
23% Not very
6% Not at all

To take part in the next Snap Poll, sign up for the free Daily Report at http://www.rbjdaily.com/dailyform.htm.

Here are some of the respondents’ comments:

It seems to me he sold off the wrong division. He should have kept the health sciences division, which has higher margins and a less fickle marketplace, and dumped the consumer/professional digital photography business. It’s the same mistake they made when they sold the government systems division to ITT. It was a highly profitable division with strong contracts doing things not many companies can do: high-precision optical systems for space-borne applications. They sold that to raise money to prop up digital photography with low margins and many major competitors. They are still living in the past when their name was synonymous with consumer photography.
—Rick Corey, Penfield

Kodak suffers from the same illness as the entire region: the refusal of Kodak and local government to recognize or consider the development of local assets and people. Kodak and local officials spend all their time looking over the horizon for solutions to their problems. … The solution to Kodak’s local or worldwide problems as well as other economic issues is to begin recognizing what Rochester offers. Then, put to use those infrastructures and people. To attract new things, you have to be attractive.
—Bob Scott, president Webfield Productions Inc. and Bob Scott Productions Inc.

Kodak has always developed technologies that have been spun off to form small businesses in the Rochester area. I think they should look more to diversification using some of these tech products—optics, for example—and not try to compete in highly competitive environments.
—Al Schnucker, Schnucker Packaging Inc.

Kodak lacked and still lacks management nimbleness and vision in running their business. All this happened on top of having a technologically obsolete main product and shifting production and personnel abroad. Recent CEOs tried to make it look good financially by abandoning profitable lines of business. Antonio Perez is a new breed of manager, but frankly it looks like a takeover by a competitor may still be on the horizon.
—Henry West

I am a Rochesterian who left the area 10 years ago but stay in touch with colleagues there and follow the local news. I work in an industry (Thomson, formerly Lawyers Cooperative Publishing in Rochester) that has gone through a similar transformation—print to electronic media. While the transition was scary for many of us, new media allow us to produce product and make money in ways that would have never been possible in a print-only world. What strikes me as amazing is that while we at Thomson try to drive up-market in our industry (go where the money is and where the competition finds it hardest to chase us), Kodak seems to have adopted the opposite strategy—getting out of its high-end health imaging businesses, eliminating R&D and going to the highly competitive lower consumer end. While there is nothing wrong with pursuing a business with consumers, it seems strange to abandon those areas that once distinguished it from the others in the marketplace. Perhaps I am missing something… but this does not look like a recipe for a turnaround.
—Paul Leidig, Thomson Corp.

The Rochester Business Journal recently reported that Perez categorized the digital business as a “crappy business” to be in. Given this observation from his lips as the definitive spokesperson for Kodak to analysts in New York a few weeks back, how can we as a community embrace any direction the company is taking—almost direction du jour. Does any of this make sense?
—Ray Del Monte, SMG Direct

Kodak is transforming itself—a huge undertaking for any Fortune 1000 company. Yes, it is slow. And yes, some painful “restructuring” has to occur as part of the process. I think Mr. Perez is turning the ship around, and as much as I hate to say it (as I still love/use Kodak film), digital is where the future is. The new inkjet products Kodak launched are re-defining the market, and new marketing techniques like the Winds of Change viral video are letting the world know this is no longer our father’s Kodak. I look forward to seeing what Kodak does next.
—Katharine McMahon, Mirror Show Management

Didn’t they already move their headquarters to China?
—Richard Stevenson, CobbleSoft International Ltd.

It would not be surprising if H.P. bought Kodak and Perez ended back at his previous company.
—J. Turan, Hammer Packaging

The market that Kodak was created for and served no longer exists. Their current products and direction are rife with competitors. Unless the company creates an entirely new product and market strategy, it is likely to become a small fish that is eaten by a larger one.
—Joseph Lancaster, president, Navalis Co. Inc.

The only direction Kodak knows is reverse. Any CEO who believes that the consumer inkjet market is the place to be needs to be removed. Low-end commodities are not moneymakers and are highly competitive. (I got a free one with the purchase of my computer.) Kodak has a serious lack of vision. Frankly, the media should not even bother covering this “story” because we know the ending—no more Kodak. What the media should start focusing in on are local businesses with vision, a viable product and a viable business plan, who are hiring, instead of the big empty yellow box.
—Barry Orlando

Returning Kodak to profitability and growth requires strong leadership and gut-wrenching internal changes. Remaining independent requires that too, along with the alignment of external, global forces that make it tough to predict what will happen in five years. Irrespective of Kodak’s ultimate ability to contribute to the local economy, the region still needs to develop a more entrepreneurial infrastructure that capitalizes on our intellectual and creative energies.
—Andy Vaughan

Kodak appears to have a penchant for entering mature markets with me-too products that have little, if any, value added or original content. Think batteries, CD players and being behind the curve on digital cameras. Their products are fine, but the costs of entering and competing in an existing market are huge, and the margins are small. Not enough profit revenue to recover those startup costs. Now, the move to go up against H-P, Lexmark and Epson in inkjet printers? That’s like Xerox going into film. Why?
—Rick Bradley

New York is not a business-friendly state. Moving out of Rochester to a more business-friendly state—especially once they shed the real estate—will be a no-brainer. Also, they got into digital with too little too late. Convergence has made the stand-alone camera a dinosaur and commodity item already. Now your camera must be more than a camera for people to consider it, and Kodak has no products like this. Even if they did, they would be trailing the market, not leading it.
—Lee Drake

Kodak seems to be perpetuating its policy of not knowing a product when it has one, and defining itself not by what it does, but what it doesn’t do. This results in selling off “non-strategic” portions of the company, the things it “doesn’t do.” However, in coming late to digital, they are not well-situated to make it their core. This is extremely frustrating considering that they were well at the digital forefront technologically 15 years ago and didn’t bother to develop the manufacturing technology to make their leading-edge products cheap enough to take market share. So what is strategic for them, i.e., digital technology, is not a core competency, it seems to me. “Castles made of sand,” to quote Jimi Hendrix.
—Jonathan Wilder, CEO, H&W Technology LLC

I am concerned with continued maunfacturing jobs leaving Rochester. This is one of the greatest challenges the community faces in the next five years. This is exacerbated by the economic unfriendliness of Rochester and New York State governments.
—Stephen Kates M.D.

Kodak has a solid line of digital imaging products for the consumer and commercial (non-office imaging) world. Most of these products will not be designed in Rochester but will come from buy resale, third-party design house, ODMs, EMSs, etc. Ninety-eight percent of these will be manufactured outside of the U.S. Time to market, customer appeal and price will drive their success. Margins are not that strong and do support organizations with many layers. Kodak’s success will depend on their ability to function in the highly competitive consumer and commercial digital imaging markets. Kodak has a lot of work ahead of them beside the current plan to right size.
— Edward Lepkowski, L-Mar Associates

The better question is whether Kodak will be relevant five years from now. Kodak originally thrived on development of new technology and bringing that technology to the market. That aspect of business seems to be sadly lacking. From the outside it is difficult to know if the development of technology has stalled or the ability to bring new technology to market is the culprit. The new photo printers are nothing more than a me-too product line. At best they may drive down the price of ink cartridges, but reputable local businesses such as Metro Cartridge are already doing that.
—Al Hinkle, Seagate Alliance

While I question Kodak’s emphasis on entering the print side of the computer industry, it appears that their strategy—while perhaps not the right strategy—may be the only strategy open to them. In my opinion, if results do not improve dramatically during the next three-year period, Kodak will be absorbed by another entity and the future of its headquarters will be in doubt.
—Robert Zinnecker, ZCS

The Kodak situation is just another example of what happens when outsiders are placed in control of Rochester’s economic institutions. Slowly but surely Rochester will turn into a wasteland.
—P.G. Maples

Kodak suffers from the same illness as the entire region: the refusal of Kodak and local government to recognize or consider the development of local assets and people. Kodak and local officials spend all their time looking over the horizon for solutions to their problems. Millions are spent on a theater in Hollywood when local music, theater and the arts struggle to exist. Millions are spent on NASCAR, while world-class events with the potential to increase worldwide sales of products by up to 7 percent are staged under the shadow of Kodak tower. The symptoms of the illness are recognized by blindness and the turning of deaf ears to those locally attempting to establish economic or cultural entities. There is no local review process for those with either a developing or fully developed concept to present and gain support. Yet, millions are spent on organizations tasked with the recruitment of events or business to the area with no accountability for closing the sale. Any system that is suggested for the creation of accountability or revenue streams to support ongoing efforts is greeted with rejection and statements. We do not work that way; you do not understand what we do! Ultimately, a lot of meetings are held, forums, trips to see how others are succeeding or failing and in the end, local projects, existing infrastructure, individuals or organizations with talent are ignored. A great cartoon shows one person upfront pulling a cart, another person in back pushing. Both people work with their heads down putting forth every effort to move the cart that happens to have square wheels and is loaded with round tires. The solution to Kodak’s local or worldwide problems as well as other economic issues is to begin recognizing what Rochester offers. Then, put to use those infrastructures and people. To attract new things, you have to be attractive.
—Bob Scott, president, Webfield Productions Inc. and Bob Scott Productions Inc.

Kodak has always developed technologies that have been spun off to form small businesses in the Rochester area. I think they should look more to diversification using some of these tech products—optics, for example—and not try to compete in highly competitive environments.
—Al Schnucker, Schnucker Packaging Inc.

Kodak lacked and still lacks management nimbleness and vision in running their business. All this happened on top of having a technologically obsolete main product and shifting production and personnel abroad. Recent CEOs tried to make it look good financially by abandoning profitable lines of business. Antonio Perez is a new breed of manager, but frankly it looks like a takeover by a competitor may still be on the horizon.
—Henry West

Times are changing so fast in the imaging field that if you don’t drastically adjust to this new technology you will be left behind. Kodak has always been a leader and must continue to lead to survive.
—Lee Salmen, consultant

I like what Kodak is doing. As far as creating jobs for Rochester, I don’t think we will see a significant increase. I believe Kodak will buy technology rather than organically grow it. It is much easier and less expensive to acquire from another company or acquire another company. I do believe their new products will be a hit, especially for the home office or just the typical home. It is four machines in one, and that saves space and gives you much more flexibility. My best to Kodak.
—Len Perno Sr., senior vice president and partner, the PARX Group

If Kodak were willing to stay in Rochester, they would do more to improve the area around Kodak office. That neighborhood is a disgrace, and it gives a poor impression of Kodak and Rochester to anyone who visits Kodak office.
—Anthony Trippe, associate professor, Rochester Institute of Technology

One often overlooked Kodak innovation is the wealth-sharing philosophy of George Eastman. Kodak employees profited as the company grew. One can only hope that Mr. Perez takes the same long-term view once Kodak returns to profitability.
—Duane Piede, North Coast Energy Associates

I worked as a mid-level manager on inkjet printhead R&D and engineering for Xerox for 10 to 15 years. They wasted upwards of $35 million a year on this technology. Basically, when it came down to it, the print quality was superb but the cartridges were not maufacturable at a reasonable cost. The designs were poorly thought out and way too complex. We had an ex-executive from HP review our designs. I distinctly remember him saying at the end of his review, “In a good printhead design, the components must fall together like Lincoln logs. Yours do not. Good luck.” The only thing that Xerox proved is that they were unable to beat HP at their own game. I have not read or seen anything that would indicate that Kodak has a ghost of a chance. HP has dominated this field for decades. And, oh, by the way, I threw out a Canon 660 color inkjet printer years ago where the printhead was built into the machine and only the ink reservoirs needed to be replaced. For me to read in the D&C that Kodak thinks that this technology is revolutionary is absurd.
—Ken Wood, Technical Edge

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