Pieces Rapidly Falling into Place After Kodak's Acquisition of Creo Is Approved
BY STEPHEN BEALS
Kodak completed its acquisition of Creo on June 22 and by June 23, Creo had, quite literally, undergone a major facelift. A team led by Kim Lawrence, a Creo expert on branding, had already spent months of preparation in anticipation of the transition. All of Creo's signage worldwide was inventoried and new EPS files and Kodak branding guidelines were sent to every office so that the new signs could be put in place as soon as the final "t" had been crossed on the court documents. All of Creo, including its Web site, was rebranded literally overnight.
Rochelle van Halm, who heads media relations for Creo, has been planning for a press event in Rochester in August and the Print 05 show in September in Chicago. "It's good that the final closing came when it did, because it gives is just enough time to pull everything together," she said.
In a transaction valued at approximately $988 million, Kodak paid $16.50 per share for all the outstanding shares of Creo, or approximately $954 million. The value of the transaction also includes Creo's payment of about $34 million to cancel options prior to the close of the deal. Kodak used its bank lines to initially fund the acquisition, with a portion of this debt to be refinanced in the capital markets at a future date.
"The inclusion of Creo - its solutions and its people - into Kodak marks another significant milestone in our journey to become the global leader in graphic communications," said James Langley, president of Eastman Kodak's Graphic Communications Group. addition of a complementary portfolio of leading computer-to-plate equipment, workflow software, prepress, proofing, digital plates, scanning and image capture solutions, in addition to the highly talented Creo team, will make Kodak a stronger partner for our customers," he said.
Personnel Changes
Beyond branding, other changes will take a little longer. As expected, Creo CEO Amos Michelson stepped down June 30 and told colleagues he plans to spend at least the beginning of his life after Creo getting reacquainted with his family. Creo Chief Financial Officer and Chief Operating Officer Mark Dance left on June 28.
Other former Creo employees will have new positions within Kodak, including Creo President Judi Hess, who has been named general manager and VP, Workflow and Prepress Equipment, in Kodak's Graphics Communications Group (GCG). Hess is responsible for a range of product offerings that includes software and hardware for computer-to-plate, workflow solutions, storage, inkjet proofing and digital halftone equipment. Hess, who joined Creo in 1995 and has held a number of general management positions, will remain in Vancouver, which will be GCG's center for prepress and workflow applications. She will report to Jeff Jacobson, chief operating officer, Graphic Communications Group, and president, Graphic Solutions & Services.
Creo co-founder and former CTO Dan Gelbart will continue to provide his expertise as senior research fellow and special adviser to GCG President Langley. Other senior Creo managers remaining with Kodak include Israel Sandler, who has been named managing director, Europe, Africa and Middle East Region, and Garron Helman, managing director, Greater Asia Region.
Structural Changes
To no one's surprise, the first major structural changes will take place in the plate and consumables sector. Over the past year, Creo had expanded its presence in the consumables market - one of the few areas where Kodak's product line overlaps with Creo's. Doug Edwards, previously VP of research and development for KPG, was named general manager and VP, consumables, and is responsible for the overall consumables business, including plates, film, halftone proofing media and chemistry.
Creo Users Association
Although Kodak has made it clear from the outset that all the GCG service teams will be merged into one, the exact nature of that process has yet to be established. Langley and Jacobson met with the independent Creo Users Association (CUA) before the purchase was completed. (GSS is one of two major groups under GCG; the other is Transactional and Industrial Solutions).
Langley and Jacobson were bombarded with questions by the CUA attendees. The meetings have a reputation for freewheeling, no-holds-barred give and take between users and Creo's management and engineering teams, so many of the questions touched upon the quality of service Kodak would provide for Creo products. According to participants in the conference, users "came to Creo because they have always had a 'gold standard' of service and we don't want to lose it."
It's a message van Halm said the Kodak managers heard "loud and clear," and they know that exceptional service must be a hallmark of the restructured company. She also said the managers left the CUA impressed. There is some interest in emulating the CUA organization by other Kodak groups. When it holds its traditional Print '05 board meeting this September in Chicago, the group will have to decide what to call itself in the future.
"Jim [Langley] and Jeff [Jacobson] were very impressed with the organization," said Rich Dunklee, president of CUA. "The CUA board of directors is debating how (or if) we might reach out to other Kodak companies to broaden the user base of the organization. We have made no decisions on re-branding the CUA, as we are not sure how [the organization formerly known as] Creo is going to be re-branded." After the meeting with Langley and Jacobson, Dunklee said, "We came away from the meeting with support from Kodak for the continuation of the CUA."
Speaking to CUA forum members, CUA Program Manager Lesley MacDonald, who works for Creo, said, "Kodak has given us every indication that they would like to continue to support the Users Association, but that these forums - in fact, all CUA services - are owned by the members and the activities of the association are directed by the elected board of directors.
"There are lots of CUA activities going on right now," MacDonald added. "We are in the process of organizing all the May '05 CUA conference material and hope to have it posted by the end of June (for access by CUA members only)." We are actively planning the CUA conference for Europe in Barcelona in early October, and we are proceeding with our plans to improve the discussion forums by moving them to a bulletin board format."
Transitioning Service
Change is certain in the services business. "Kodak plans to integrate Creo's service into Kodak's global service organization," Kodak spokesman Anthony Sanzio told The Seybold Report. "Kodak has already integrated the Encad, Kodak Versamark and NexPress service organizations into Kodak's global service organization. TSI, KPG's service organization, will be integrated into Kodak in the third quarter of 2005."
So while the timetable for transitioning Creo's support to Kodak remains to be established, there is no question it will happen. "Integration planning is under way and will take some time to conclude. We expect that the new organization may need to be different in structure and size than the sum of the current businesses if we are to be a high-performing organization," Sanzio said. No changes in the product line have been announced. Creo's Synapse InSite and Kodak's RealTimeProof are two of the few products that overlap, but no one would comment on what might happen with those two products.
However, it sounds like one of the products Creo has been selling to a Kodak competitor might stay in the lineup. When asked if Creo's Spire digital front end (DFE) product would continue to be used by Kodak's competitors such as Xerox, Sanzio said, "We intend to work to continue mutually beneficial partnerships as Creo becomes part of Kodak, and Xerox's use of Spire is no exception."
Asked about persistent rumors of other Kodak acquisitions, Sanzio said, "As a matter of policy, Kodak does not comment on rumor or speculation. We have stated that the purchase of Creo would essentially conclude the company's acquisition plan, announced in September 2003."
Our Take
Although it is much too early to tell exactly how Kodak's acquisition will affect the products and services offered by the former Creo, a few things are already clear.
Kodak, one of the world's great brands, should be delighted by the way Lawrence's team instantaneously rebranded Creo's entire worldwide operation. Relative to the other things Kodak must accomplish, that might not seem very significant, but the fact that it was carried out so efficiently is a good first sign.
Major personnel shakeups are inevitable, and since Creo was always a tightly knit community, Kodak will have to make the surgery as non-invasive as possible - a tough order for anyone.
For users, the key is service. Scitex users complained of a decline in service after Creo bought that company, but overall Creo has attained much higher than average marks around the industry in terms of service and support. Its cohesive - and sometimes strident - network of users in the CUA will not tolerate any slippage in the service area, which might be the hardest nut to crack of all.
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