Kodak is toast
Kodak Plans Strategy Shift to Produce
Lower-End Models of Digital Cameras
By ALEC KLEIN
Staff Reporter of THE WALL STREET JOURNAL
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Eastman Kodak Co., in a major shift in digital strategy, is preparing to hit the market with cheaper, lower-quality digital cameras and is rethinking its pricing structure for online services.
The move is an apparent concession by the world's biggest photography company that it has fallen behind a growing number of competitors who are hawking inexpensive digital cameras and offering free imaging services on the Internet. Kodak officials acknowledge that the decline in the company's stock -- which has been steadily slipping closer to its five-year low of $51 -- is largely because of investor fears about the company's digital future.
Willy C. Shih, Kodak's president of digital and applied imaging, said he was aware of the prevailing view that "digital is disruptive technology" to Kodak's franchise. But he insisted that it will help the photography industry expand.
Last year, Kodak built its nascent digital strategy around high-end products, selling cameras that cost more than $500 on average and offered megapixel resolution, or more than one million dots per image.
Kodak's digital-camera sales rose 72% in units last year, and it holds the No. 2 spot in market share behind Sony Corp. But Kodak has lost share in an increasingly crowded field of competitors -- there are now at least 43 digital-camera makers. Kodak's U.S. market share in digital cameras, measured in units, dropped to 17.2% in January, down nine points from the year-earlier period, according to PC Data Inc. Meanwhile, low-cost alternatives, from makers such as Polaroid Corp. and Hewlett-Packard Co., are gaining.
Now, Kodak is planning to introduce digital cameras with lower prices and submegapixel resolution, Mr. Shih said.
He also said Kodak is "looking at pricing" of its digital-imaging services, which have received a lukewarm reception. Last year, Kodak generated $30 million in revenue from this sector.
One component was launched in October, Kodak's venture with America Online Inc. called "You've Got Pictures." Consumers can get their pictures delivered, like e-mail, to their AOL computer accounts for about $6.
Analysts expect $3 billion of Kodak's estimated $14 billion in revenue this year to come from digital products and service, up 30% from last year. |
