Picture keeps getting worse at Kodak

Hillary Wicai Aug 1, 2006

KAI RYSSDAL: It was anything but a Kodak moment on Wall Street today. Shares in the world’s largest maker of photographic film tumbled almost 13 percent. Investors were bailing out right from the opening bell. Kodak posted its seventh-straight quarterly loss this morning. Cut its revenue forecast, too. Marketplace’s Hillary Wicai reports the company’s turnaround plan isn’t developing the way anyone thought.

HILLARY WICAI: Kodak was a latecomer to the digital revolution. No news there. But when it decided in 2003 to make the shift, it did, and how. Kodak currently ranks third in the world overall in digital camera sales. So why the announcement of revenue expected to decline by about 3 percent this year? Analyst Chris Chute attributes it to selective printing.

CHRIS CHUTE: I don’t think that they’re seeing the customers return to market to buy photo and ink paper packs as much as they had hoped they would.

Kodak’s Chairman and CEO Antonio Perez says by the end of next year most restructuring costs will be behind and the company will be positioned for sustained success in digital markets. But will it pay off?

For example, take my June wedding. Plenty of digital clicks while I walked down the aisle. But then, instead of prints, I got mostly e-mails with attachments or links to sites where the photos are stored, and very few pictures were ever printed out. Where’s the cash for Kodak in that?

CHUTE: That’s a question that pretty much everyone in the photography market these days is asking themselves. You’re competing against a medium that basically offers free storage and the ability to share pictures without any cost.

Still, some people want prints and Kodak seems to, in part, be banking on those printing kiosks you see in stores. Broker Ulysses Yannas says Kodak has 75,000 of the kiosks worldwide and that’s part of the reason he remains bullish on Kodak, despite today’s less-than-stellar earnings report.

ULYSSES YANNAS: These kiosks are the ones that make the prints. That’s where the money’s made. It’s not made on cameras.

So clearly Kodak’s still got some reinventing to do.

In Washington, I’m Hillary Wicai for Marketplace.

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