Kodak to Shun Film Technology in Favor of Digital

29 September 2003

Eastman Kodak, the ailing King of film-based technology, has finally awoken to the fact that its Canute-style solution to the encroaching digital tide isn't working.

As the cyber-waters lap over its knees, the Rochester, New York-headquartered company has decided to shift from its traditional film-based business to digital technology, funding the strategic changes with a draconian cut of 72% in its annual shareholder dividend, reducing the payout to to 50 cents per share.

Says ceo Daniel Carp: “We are acting with the knowledge that demand for traditional products is declining, especially in developed markets.” Kodak aims to spend up to $3 billion (€2.61bn; £1.81bn) on digital investments and acquisitions to boost annual revenues from $12.8bn to $16bn by 2006.

Marketwatchers and analysts are less than enthused by the move, questioning whether Kodak has missed the boat? But Peter Grant, printer analyst at technology research consultancy Gartner, believes Kodak has little alternative but to adopt the new strategy.

“It's something they have to do. But they are late and I'm not sure they have the capability to compete with HP, Epson and Lexmark,” he opined.

And proving that actions speak louder than words, investment risk assessor Standard & Poor’s promptly downed its credit ratings on Kodak's debt, citing “doubts about the profit potential of digital imaging relative to conventional photography”.

While the advertising implications of the seismic shift are uncertain, it will almost certainly impact on creative and media strategies. News of a pitch call will cause little surprise.

Data sourced from: Financial Times; additional content by WARC staff