People may no longer buy much film, but breakfast-cereal boxes are forever. That’s the assumption driving Eastman Kodak (EKDKQ) as it exits bankruptcy this week as a relatively small, relatively staid business focused on printing packaged goods for consumer brands and other corporate clients.
Kodak, it turns out, is really good at large-scale digital printing and something called computer-to-plate technology, which quickly transfers images from a hard drive to a printing press. This is the somewhat sad distillation of more than 130 years of serious and celebrated R&D. Kodak, or what’s left of it, excels at printing things on foil, plastic, glass, and metal, according to its lengthy pitch (pdf) to stay in business and avoid liquidation.
The Rochester (N.Y.) company will no longer wow the mass market as it did for decades with supersaturated pictures, sharp X-rays, tiny video cameras, and disposable electronics. In fact, it won’t do any business directly with consumers. In place of the once-beloved Polaroid, the new and less lovable Kodak will instead crank out timeshare brochures and toothpaste boxes, candy wrappers, and corporate presentation decks. It will also make touchscreen components for smartphones and tablet computers and film for the movie industry.
Boring, however, may prove to be beautiful for a company that teetered on the brink of the abyss. If all goes according to Kodak’s reorganization plan, the company will post $2.5 billion in revenue this year and $167 million in earnings before interest, taxes, and such noncash expenses as depreciation and amortization. It will also have only 8,500 workers, down from almost 64,000 a decade ago.
But the future is not entirely rosy. The commercial-printing business is not nearly as wide open as the market for digital cameras back in the late-1990s—or, for that matter, the film camera business of the late-1890s, when Kodak really made its mark. The proliferation of tablet computers has led, in part, to a decline in revenue for U.S. commercial printing, which has dropped at an average annual rate of 6.2 percent (pdf) in the past five years, according to market research firm IbisWorld.
Kodak will also have to go up against even bigger rivals, companies that have nowhere near the name recognition but boast far bigger and more focused operations. Most notably, it will compete against Chicago’s R.R. Donnelley & Sons (RRD), which has 57,000 employees and printing operations worldwide. Last year, Donnelly posted $10.2 billion in revenue—four times more than Kodak’s modest post-bankruptcy goal. Wisconsin-based Quad Graphics (QUAD), in Sussex, Wis., will also be a formidable foe. It had $4.1 billion in sales last year and 21,400 workers.
Kodak, however, seems to like its chances. “When we created the new portfolio, we were very aware of the fact that we were going to be late coming into this market,” Chief Executive Antonio Perez told Bloomberg News in an interview. “The only way that you could be successful coming in late is to come into the market with breakthrough technologies and very differentiated value propositions, and this is what we have.”
