Kodak Hires a Web Guru
To Develop Its Digital Plans
By LAURA JOHANNES and JOANN S. LUBLIN
Staff Reporters of THE WALL STREET JOURNAL
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Eastman Kodak Co., which became an American icon with its easy-to-use cameras and popular yellow-packaged film, is struggling to adapt to a new world where pictures are stored as bytes on floppy disks. As a growing number of Americans buy filmless digital cameras, the venerable 120-year-old corporation finds itself battling for turf with the likes of Zing.com (www.zing.com), a two-year-old Internet start-up that urges its some two million visitors a month to, "Store all your pictures forever -- free."
Last month, after years of charging for online storage of photos uploaded from digital cameras, Kodak started offering the service free on its Web site. It has also taken bold new steps to offer inexpensive digital cameras, and printers that work directly and conveniently from the cameras' miniature storage disks. In its latest step, Kodak is hiring Ted Lewis, one of the Silicon Valley's best-known Web gurus, to help give it the inside track on hot new start-up technology that could give it an edge.
"A full-time pair of smart eyes in Silicon Valley is a must for Kodak," says James Stoffel, Kodak's chief technology officer.
Mr. Lewis, a former academic, consultant and gadfly known for his sharp statements about old-line corporations that fail to embrace the Internet era, has been a full-time DaimlerChrysler AG executive since August 1999, advising the auto maker on Web strategy and investments. He starts Monday as Kodak's new senior vice president for digital business development.
Kodak hopes Mr. Lewis' expertise will help give the company a stronger foothold in the fast-changing and highly competitive world of digital photography. He will mainly work out of his Salinas, Calif., home and spend about $100 million in Big Yellow's venture-capital money on start-ups with hot new technology that Kodak needs. As a measure of his importance to Kodak, he will report directly to Chief Executive Daniel Carp.
Kodak posted $14.1 billion in revenue last year, largely on the strength of its mainstay silver halide film, processing and other traditional imaging products. But the digital age has changed the world, and Kodak must adapt, or face extinction. Some 6.7 million digital cameras will be sold this year -- more than double the 3.3 million sold last year, predicts InfoTrends Research Group Inc.
Kodak, which estimates that nearly half its revenue will come from digital products and services by 2005, has made adapting to the digital revolution a top priority. It has allocated $500 million a year to digital research and development funds.
But some say Kodak, for all its efforts, has missed the boat in several key areas. Until recently, the company had been focusing primarily on higher-priced digital cameras, while competitors made hay with models priced from $100 to $300. Kodak, in an alliance with Lexmark International Inc., is now offering a snazzy new line of photo printers with user-friendly features. But there again, Kodak's introduction last year of the first of these printers was years behind competitors.
Finding the right alliances with high-tech has been tough. The company's much-ballyhooed partnership with Intel Corp. has so far resulted in only one product -- Picture CD, a compact disk on which high-quality digitized pictures are stored. And that product, perhaps partly due to its $7 to $10 price tag, is off to a slow start.
Online, Kodak has high visibility, but, like with Picture CD, its high prices may be turning off some consumers. According to PC Data Inc., Kodak's two Web sites -- photonet (www.photonet.com) and kodak (www.kodak.com) -- drew a combined total of 2.5 million unique visitors in August, slightly exceeding the number who dropped in on Zing that month. While offering free digital uploads and storage is a major step, Kodak's prices for other services, such as digitizing photos taken on traditional cameras, are still high compared with rivals.
"Their pricing needs to be revamped. They just can't be competitive, and that's why the service has not met anybody's expectations," says Jonathan Rosenzweig, an analyst at Salomon Smith Barney.
Mr. Lewis applauds Kodak's recent push to offer more and more digital services, such as reprints that can be ordered with a mouse click after viewing photos online. But he believes, in the long run, that the company's best new opportunities lie in getting in on the ground floor of key new technologies, and setting technological standards -- much as Microsoft Corp. has done with its Windows operating system.
For example, Kodak just came out with a gadget that, when added to a Palm Pilot, takes pictures that can be beamed to other Palm Pilots. In the future, Mr. Lewis would like to see Kodak lead the market with technology for digital cameras that can send images at short range to each other, to other wireless devices or to conveniently located stations that would load them to the Web.
"Say you're in a rental car in Hawaii and don't want to pack all these memory chips because they are $100 a piece," he says. While you're pumping gas, he adds, the pump would ask, "'Do you want to upload your film for $5.99?' And you say 'Sure.' "
Mr. Lewis concedes that Kodak is in a tough position of wanting to position itself for the digital era without writing off its lucrative traditional businesses too early. At DaimlerChrysler, where he ran its North American research and technology center from Silicon Valley, he experienced the drawbacks of working for a bureaucratic behemoth. It took him six months before he finally won corporate approval of a new $100 million fund for its venture-capital unit, for instance.
"Initially, I was frustrated because I tried to get the fund [going] and tried to get things moved faster," he recalls. He says the new fund has pursued about 20 possible investments, with two on the verge of completion, "and a third is close."
Although the auto maker's venture-capital unit was designed to be more nimble than the parent, it still acted slowly by Silicon Valley standards and missed some attractive deals. "You are dealing with a fairly large organization," Mr. Lewis says. "But we parted friends."
Mr. Lewis "got a lot of things started. He did a good job for us," says his former boss Ralf Herrtwich, a DaimlerChrysler research director. "We certainly are unhappy to see him go." Mr. Herrtwich says his former colleague also arranged certain Silicon Valley licensing agreements and helped develop a new e-business strategy, which DaimlerChrysler will unveil today at a Stuttgart, Germany, news conference.
Kodak's digital research budget, while more than adequate in dollars, needs to be "turned into product in a time scale equal to what you see in Silicon Valley," Mr. Lewis says. Through Kodak's enlarged venture-capital fund, he says he will focus on early-stage companies "in Silicon Valley and other parts of the world." Kodak might launch joint ventures with Mr. Lewis's finds, buy small stakes in them, or buy them outright.
Kodak senior management decided last January that the company needed "to try to find someone with this talent and capability" in order to quickly identify and leverage its investments in cutting-edge advances, says Mr. Stoffel, the technology officer. Recruiters Spencer Stuart handled the search. Mr. Lewis will work closely with Willy Shih, Kodak's senior vice president for digital and applied imaging, as well as Mr. Carp, the CEO, and Mr. Stoffel.
"With Ted's help, there are lot of other things we aspire to participate in -- and don't even know about" yet, Mr. Stoffel adds.
By switching employers, Mr. Lewis no longer will get a Mercedes E-Class as his company car. Still, there are tradeoffs. The computer scientist gets to tinker with as many Kodak cameras as he likes. And under his three-year contract, Kodak must let him work in Monterey County, where he lives. "I wasn't going to move from Silicon Valley," he explains. |
