A company synonymous with cameras and photography for 131 years is looking to file chapter 11 bankruptcy in the next few weeks if it can’t sell some 1,100 of its patents to raise capital. As part of their efforts to stave off the filing, the company had talked to hedge funds about borrowing hundreds of millions of dollars to bridge its finances until the patents sell, but the talks have fallen through. It is also in discussions with large banks including J.P. Morgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. for money to keep the company operating while in bankruptcy, should that be necessary.
Many might think that Kodak’s troubles came from the waning use of film cameras, but the situation is more complicated than that and goes back decades. They actually invented the digital camera in 1975, but ironically were not able to find a way to profit from the new technology. The company first started hitting financial trouble soon after, in the 1980s, when they had difficulty competing with foreign companies on film sales. This was then exacerbated by the rise of digital cameras and smartphones.
During this time, they tried selling chemicals, bathroom cleaners and medical-testing equipment, finally deciding to focus on consumer and commercial printers (which they have done for the past five years). However, that market has proven very difficult to get into, and a lot of capital was spent to subsidize sales of the printers in order to increase demand for the ink. These financial woes were further compounded by hundreds of millions of dollars a year in obligations to cover pension and health-care costs for retirees.
Kodak’s future is uncertain, and it could easily go the way of Polaroid, Borders, and Blockbuster, which succumbed to radical changes in their markets caused by advancements in technology. If it is to survive, it will have to do a much better job of reinventing itself than it has to date.