Kodak’s Strategy Shift

I have ambivalent feelings about this move by Kodak.

Kodak's plans to enter the printer market will put it in competition with entrenched consumer electronics firms including Hewlett-Packard (HPQ: Research, Estimates), Canonlinks (CAJ: Research, Estimates), Seiko's Epson, Lexmark (LXK: Research, Estimates), and computer vendor Dell (DELL: Research, Estimates), which recently started selling relabeled printers manufactured by others.

At the same time, Kodak will not make any more significant investments in traditional consumer film, though it will make private-label film to sell under non-Kodak brand names internationally, the spokeswoman said, confirming a report in the Wall Street Journal.

I think they are smart to get out of film. It will slowly be relegated to a small niche industry, and the move shows good judgement and foresight on the part of Kodak. Many companies would have just denied that the industry was changing and ended up going out of business, so I like this part of Kodak's decision. However, the printer business is highly competitive. It is not the industry I would choose to be in. It has good growth potential, but also has some of the fiercest competitors in the world.

I worked at Lexmark from 1997-2000, and there was an intense focus on keeping the cost down. Margins on printers were razor thin, or even negative with some rebates, and the money was all made on the cartridges. I'm not sure there are high profits to be made in this market. I understand that Kodak's core competencies are in photography, but it may be time to diversify and become a conglomerate.

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