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Kodak presents low-cost digital printing

Kodak presents low-cost digital printing
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First Published: Tue, Feb 06 2007. 11 58 PM IST
Updated: Tue, Feb 06 2007. 11 58 PM IST
By Agencies
Eastman Kodak Co., the world’s largest photography company, for the first time plans to sell printers that use lower-cost ink cartridges to compete with Hewlett-Packard Co.
Chief Executive Officer Antonio Perez will unveil three silver-and-white printers, which sell for under $300 and can copy and fax, on the set of “Saturday Night Live” today in New York’s Rockefeller Center, company officials said. The printers’ color ink cartridges will be priced at about $15, or half the cost of some competitors, analysts said.
Perez, who built the consumer inkjet division at industry leader Hewlett-Packard, said shortly after coming to Kodak four years ago that he would bring the company’s own printer to market. Rochester, New York-based Kodak spent an estimated $100 million on the project, while firing more than 23,000 workers to help finance the switch to digital cameras and accessories.
“This is a real do or die product for Kodak,” said Charlie LeCompte, president of Lyra Research Inc. of Newtonville, Massachusetts. “Consumers have gotten resentful of cartridge prices. Kodak is exploiting vulnerability.”
Hewlett-Packard sells color cartridges for $25 to $30, said Ron Glaz, program director at researcher IDC Corp. in Framingham, Massachusetts. Kodak’s color cartridge is priced at $14.99 and its black-ink goes for $9.99.
“ They will have premium ink at half the cost,” Cheryl Pohlman, Kodak’s worldwide product marketing director for inkjet systems, said in an interview.
‘Logical Move’
Perez agreed last month to sell Kodak’s health-imaging unit to Canadian buyout firm Onex Corp. for as much as $2.55 billion. Worldwide sales of digital cameras and accessories fell 25 percent in the fourth quarter.
“If they can get into inkjets, it’ll be a logical move for the company,” said Rusty Robinson, president of Robinson Investment Group in Brentwood, Tennessee, which has been selling Kodak shares and currently owns more than 27,000. “You have a tragedy unfolding with this company and don’t know what the Cinderella story will be other than: ‘we’re in the digital camera business now and we’re a transformed company.”’
Shares of Kodak fell 4 cents yesterday to $26.26 in New York Stock Exchange composite trading. They gained 10 percent last year, less than the S&P 500’s 14 percent increase.
Kodak, which began marketing the first consumer camera in 1886, posted eight straight losses amid a shift from film to digital until last quarter. The company on Jan. 31 reported fourth-quarter net income of $16 million, or 6 cents a share, on higher revenue from photo kiosks and savings from firing workers. Sales fell 9 percent to $3.82 billion.
H-P Way
Last August, Kodak shares plunged to $18.93, the lowest in 26 years, as losses mounted. The stock reached a high of $94.75 in 1997. The company was removed from the Dow Jones Industrial Average in April 2004 after its market value sank to $7.8 billion from $26.6 billion in 1996. Now, its market value is $7.54 billion.
At Hewlett-Packard, Perez expanded the company’s inkjet business to 100 million installed printers from 17 million over five years.
Some investors are betting he can duplicate that kind of success at Kodak. Baltimore-based Legg Mason Capital Management, Kodak’s largest shareholder, with 47.9 million shares, bought more than 6,700 additional shares in September.
“We think 2007 will be the year that Kodak takes its seat at the inkjet table,” Matthew Troy, an analyst at Citigroup Global Markets in New York, wrote in a Jan. 31 note. He has a “sell” rating on the stock and doesn’t own any. Kodak invested more than $100 million in inkjet technology, Troy wrote.
Kodak spokesman Dave Lanzillo declined to comment on sales targets for the inkjets or the cost of developing them.
‘Very Late’
Kodak said the recurring sale of printer supplies will bolster revenue and profit. The average user will go through about five cartridges a year, Kodak’s Pohlman said.
“We wanted to make sure people didn’t want to limit their printing,” she said.
Kodak lost its lead in the U.S. digital camera market last year, dropping to third behind Canon Inc. and Sony Corp., as it sold fewer lower-priced models, according to IDC Corp. Perez is under pressure to increase sales in new markets, such as printers, analysts said.
“We are obviously very late, like 20 years late, into the market,” Perez said on a conference call in May 2006.
Spending Slowdown
Kodak is pricing the printers higher than rivals, said LeCompte. Hewlett-Packard sells an inkjet device that prints, scans, and copies for $79.99, according to its Web site. Kodak’s cheapest inkjet is $149.99. The devices will be sold exclusively at Best Buy Co. stores and through Kodak’s Web site, Kodak said.
Consumers probably spent less on inkjet printers last year than the $3.9 billion in 2005, said Camille Iorns, an analyst with Gartner Inc., a Stamford, Connecticut-based technology research and consulting company. More people are printing photos through online galleries and picking up the prints at retailers such as Wal-Mart Stores Inc.
“It would be difficult for any vendor to break into the inkjet space in the U.S.,” Iorns said. “Is it too little, too late?”
The company missed out on the growing popularity of digital cameras in the early 2000s when executives still bet on film. The inkjet printer project could once again show that Kodak missed the boat, said John Moore, a New York-based analyst at Moody’s Investors Service
“Until there’s demonstrable execution, we’re cautious,” Moore said. “Now you’ve lost the cash flow from health, show me how you can keep growing from the businesses that are left.”
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First Published: Tue, Feb 06 2007. 11 58 PM IST
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