

Kodak files for bankruptcy - leak
http://www.marketwatch.com/story/kodak-files-for-bankruptcy-2012-01-19?link=MW_pulse

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asmithmd1
It is ironic that Citibank now ultimately will be calling the shots at Kodak
because of the $950M "Debtor in Possession" line of credit:
<http://en.wikipedia.org/wiki/Debtor-in-possession_financing>

When Citibank was bankrupt the Secretary of the US Treasury gave Citibank $45B
for preferred stock - basically no strings attached. Shareholders of Citibank
kept their equity. The Citibank management that had run it into the ground and
stayed in place will now be the ultimate decision makers at Kodak.

Why isn't anyone talking about breaking up these "too big to fail" banks? When
they get in trouble again now they will be able to point to saving Kodak as
another reason they should be bailed out. If you saw this situation in a third
world country: National government loans to bank, bank loans to industry; you
would see this a croneyism and not be likely to invest or build a business in
that country.

~~~
jonknee
You should also note that the US Treasury ended up making $12B on that deal
after repayments.

[http://finance.fortune.cnn.com/2010/12/07/treasury-
near-10-b...](http://finance.fortune.cnn.com/2010/12/07/treasury-
near-10-billion-citi-windfall/)

~~~
asmithmd1
So you have no problem with the Secretary of the Treasury being the VC in
chief for the US, deciding what companies are worthy of investment?

~~~
jonknee
I think in hindsight it was a good move. Probably not the best move possible,
but certainly better than letting a total collapse happen.

Regardless of what I think, my point was that your phrasing made it sound like
it was a gift when in reality it was a very profitable transaction for the
treasury.

~~~
gbhn
Sure, but nowhere near as profitable as for the bank, which was saved from
near-certain collapse. If you are in a negotiating position like that, you
work it for a lot more than the USG did.

Specifically, you have the moral obligation to negotiate that position for the
benefit of citizens at large. The government did not do even really attempt to
do that, which is a political crime for which there has not yet been a
reckoning.

~~~
jonknee
The objective was to prevent collapse. The return was just a bonus. It would
have been the height of irresponsibility to lose time while negotiating a
bigger vig for the tax payers as the financial system burns to the ground. A
25% return in two years is nothing to complain about and if the return had
been say 50% it would still be almost completely unnoticeable to the tax
payers.

That doesn't mean it was right to not change the source of the problem after
the crisis, but that's a whole other debate.

------
dsplittgerber
Great article from The Economist on what mistakes Kodak made and what led them
to bankruptcy compared to Fujifilm: <http://www.economist.com/node/21542796>

~~~
gchpaco
There's been a lot of wink-wink nudge-nudge over the years to the effect that
Fujifilm was subsidized by the Japanese government; to what extent this was
the favorable tax deals Kodak also got and to what extent it was real was and
is hard to assess, but it is certainly the case that Fuji was not burdened by
the antitrust pressure that led Kodak to divest itself of its camera-making
arm in the middle of the 20th century. There's a lot of claims to the effect
that Fuji piggybacked on the pioneering Kodak research work, and this is very
difficult to refute, but if they did they at least equaled Kodak in quality.
When people talk about "cheaper film" it was, but not that much cheaper and at
least the equal in quality, sometimes better; I found Fuji's consumer films to
be far preferable to that turd Kodak called Gold 400.

No one in the industry was really prepared for the nose dive film sales took;
essentially only die-hards like me still buy it. Film was and is to some
degree still capable of more resolution, more dynamic range, better color
fidelity and less prone to weird errors in the way that a Bayer sensor does
(almost every Bayer ever sold to consumers had a detail destroying filter
attached to it because the alternative is horrific Moire effects), but the
speed of editing digital caused it to take off like a rocket. I suppose the
lesson to be learned there is that Kodak spent a century making the very best
film it possibly could (for the professional lines, anyway) when it turns out
the market is perfectly happy with a 4 MP digital with a mediocre lens and
chromatic abberation out the arse if it cuts the feedback loop down from days
to seconds.

I have mixed feelings about Kodak in general--they had a tendency to make
bizarre decisions that led the few film enthusiasts remaining to believe that
it was simply a matter of time before everything got the shaft and they would
have to switch to something else anyway. They also made a lot of really bad
digital cameras, which was strange considering the superb reputation their
press lenses and the Retina had back in the day. Fujifilm never divested
itself of its cameramaking arm and continues to make some of the best lenses
in the business to this day, and I think that has been a very important
strength for them.

~~~
bane
"Kodak spent a century making the very best film it possibly could (for the
professional lines, anyway) when it turns out the market is perfectly happy
with a 4 MP digital with a mediocre lens and chromatic abberation out the arse
if it cuts the feedback loop down from days to seconds."

Which is exactly the same phenomenon that occurred with music. The industry
kept moving to better and better formats, only to be confounded that people
didn't mind lower quality lossy compressed mp3s with swishy sounding hi-hats.

~~~
masklinn
> The industry kept moving to better and better formats

These formats were never made available outside "the industry". I've seen
almost no artist (outside of Bandcamp which does it by default/for free)
providing lossless downloads, let alone HQ tracks or 3+ channel tracks on
normal albums. Reznor is the only one who comes to mind (he released
multitracks and 24b/96KHz of Ghosts I-IV in the Deluxe editions)

~~~
mixmastamyk
Super Audio CD and DVD Audio were both introduced around the turn of the
century.

~~~
bane
Exactly what I was thinking of, and they've been DOA. Before that DAC was
fairly widely available, but there wasn't much content available on them and
were usually used as a studio medium.

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ck2
A lot of companies even larger than Kodak have emerged from bankruptcy though.

It's just a sign that old management methods have failed and time to change.

The problem is once something becomes a commodity, it's hard to make profit
from there. I am going to be very curious to see what happens to the iphone
brand in a decade. Once it would have been impossible to imagine the "walkman"
brand to fade away.

~~~
flyt
yes but 'Walkman' or 'iPhone' aren't the only products made by their
respective companies, and they keep trying new stuff.

Kodak is dead because they rode the analog film horse into the ground and
never realized they needed to diversify and leverage their brand into
something new and better for the next 50 years.

~~~
potatolicious
But they did, they just did it all wrong.

Kodak hasn't been a film-company for years, and in fact they _still_ lead the
industry in many ways. For example, look at the market for high-end medium
format digital sensors, Kodak is still at the top of that heap. Of course, the
market for $20K digital backs is... pretty small.

Kodak's strategy in the digital age was try to become a technology broker, and
let others tackle transforming this tech into actual end product - but it
doesn't take a genius to figure out that your licensees and customers will
eventually vertically integrate and push you out entirely. Canon built their
own sensors, Sony got into the sensors game and pushed Kodak completely out of
the consumer sensor realm, and between those two Kodak's doom was all but
sealed.

Instead, their consumer-level efforts focused on stupid, low-margin,
technologically simple wares like inkjet printers and digital photo frames,
all lowest-common-denominator product categories where Kodak didn't have a
significant technological edge against its competitors.

Kodak _invented_ the digital camera, but they completely dropped the ball.
They _needed_ to ship their own cameras.

~~~
justincormack
Kodak sold their sensor division a few months back.

------
pvarangot
For all of you speculating about what business decisions took Kodak to the
current situation let me give you my perspective as someone who still buys
their film products. I'm also sort of experienced in shooting digital.

I personally believe Kodak _screwed_ film.

I mean, their new emulsions are superb, and they can run around Ilford and
Fuji in circles in everything except maybe slides, where Kodak is still better
but ridiculously expensive. They screwed film because they where the only ones
in a position to take film into the next technological level, but kept
managing that division as if it was 1980 and everybody was still printing at
the lab or at their own darkroom. They should have focused more on people who
still develop at the lab but scan film themselves.

The only feature they introduced that helped self-scanning was stronger
carriers. They also claim dyes that ease color management in some of their
color negative films but I call that bullshit. Color management in color
negative film is a PITA unless you own a Kodak minilab. They had the
opportunity to give everyone better color management technology by making
targets that are affordable, making easy to use software or even making their
own film scanner. They didn't, even thou there were strong rumors about it
happening, and even while they still sell their stupid 4x6 print scanners.

Basically now scanning color negative films for most photographers is sort of
a painfully inaccurate manual process. Slides are easier but also cost more
and have less dynamic range than digital and similar color rendition and
accuracy. Black and white can be managed by even amateur photographers but
Kodak could still make it a whole lot easier.

I really would like for at least their film division to manage to go out of
bankruptcy, since I have only recently began shooting Ektar and love Portra...
But if they really go out of business I think I'll sell my MF film gear and
start saving for a full frame 35mm DSLR or maybe a Pentax 645d.

~~~
gchpaco
Kodak emulsions are fantastic, I will agree with you there. I happen to
actually quite like NPH and NPS (or whatever the hell they're called now) and
can put in a solid recommendation for Reala, which is available in 120. I'm
much more familiar with the Ilford side of the stable, where I generally
prefer to go with FP4+ (still IMHO the best all-round B&W and runs rings
around Plus-X) and Delta 400. I find I disagree with the TMax emulsions too
much to be happy using them, but I'm assuming here that you do, because almost
nobody really loves Plus-X... in that case I might recommend Fuji's ACROS as a
near TMax 100 substitute. I don't get along with it for the same reasons I
don't get along with TMX but it is very good at what it does.

------
VonLipwig
Sad thing is that Kodak invented the digital camera. At the time the sales of
the film for their Kodak camera's were doing so well they decided to shelve
the project instead of jeopardize those sales. (That is how I understand it
anyway)

20 years or so later everyone has a digital camera and all Kodak has are some
patents.

~~~
Delmania
I live in Rochester, and have had the chance to speak with several people who
worked for Kodak (and some still do) about this issue. The company has obscene
profit margins from film, I've heard quotes of around 20% and higher, and
there was a belief that film would always be around. However, many people
within the company knew film had a limited lifespan and that with the advent
of personal computers, it was only a matter of time before digital took over.
They also knew there was no way Kodak was going to be able to make the same
profit margins on digital as it did on film. With that in mind, it made it a
hard sell to get leadership to really focus on the long term..

~~~
asmithmd1
"The company has obscene profit margins from film, I've heard quotes of around
20%"

If you are talking gross margin that sounds closer to a marginally profitable
product than "obscene."

------
doublextremevil
Kodak joins a lot of older companies that just cant keep up with the changing
world. Take RIM for example who said to the original iPhone “There is no way
that phone can do what they showed off on stage.” It is sad but bound to
become more commonplace. Blockbuster and Circuit City also come to mind as
companies that used to dominate, but are now long gone.

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caffeine5150
I know of a high level marketing consultant who, in the mid-late 90's was
presenting to Kodak management. The presenter before him gave a 'rah rah'
speech listing all of Kodak's core competencies. Prior to starting his
presentation, the consultant offered some frank words for his audience. He
said that all of those core competencies were fine, but that if Kodak wasn't
fully focused on digital within the next few years, they would be in deep
trouble. Management didn't like hearing that and invited him to leave the
conference despite it being a multi-day engagement. That's the nature of large
organizations - they tend to insulate themselves from painful truths and
challenges by discounting or ignoring them.

------
medius
This is not unexpected, but a very sad "Kodak moment." I can't help but think
about Innovator's Dilemma when I think about Kodak. Didn't they decide not to
pursue digital camera so that they don't cannibalize their film business?

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sreyemhtes
Kodak must be remembered for being one of the first popularizers of
technology. Kodak did not invent photography, but it made it _accessible_ to
the public, putting it in the hands of the middle class and amateurs instead
of just professionals. They were the Apple of the 1890s. If you want to look
for a photograph of their legacy, don't look for any famous photos, but for
the snapshots members of your family were taking of you while you were growing
up.

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nixy
This is a very sad, but also dignified way for a company to face the fact that
their business model is based on technology that has passed. Now, the
recording industry...

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MarkMc
Technological change made Kodak obsolete - there's not much management could
do about that. But what really annoys me is how badly Kodak management handled
it.

Rather than simply winding down the business and paying cash to shareholders,
they ploughed money into developing digital printers and digital cameras; a
market with thin margins and where they had very little competitive advantage.
It's almost like management couldn't bear the thought of going out of business
so they ended up doing something worse - losing more money and THEN going out
of business.

I think Microsoft has made a similar mistake. Rather than sitting on it's
little nest-egg of Windows and Office and miking the cash until it runs dry,
it feels compelled to waste money in areas with no competitive advantage.
Bing, Windows Mobile and XBox have all provided a worse return on investment
than US treasury bills.

~~~
beaumartinez
I'll agree with Bing and WinMo, but Xbox? Are you serious? There's one in
every teenager's household. It might have cost them a loss to get there, but,
if anything, it's an investment for the future—people need to buy games (and
accessories, hello Kinect) for their Xboxen.

~~~
flomo
Perhaps because the product is primarily used by teenagers, brand recognition
and long-term loyalty historically hasn't mattered much in the video console
industry. For example, the several billion dollars MS sunk into XBox 1 means
nothing to the next crop of 14 year olds, who weren't even alive at the time.

Plus, MS has been unable to leverage XBox users into buying Zunes or Windows
Phones. I suspect MS's XBox investment will ultimately amount to very little
in the long term.

~~~
redrobot5050
Really? Really? Are you _really_ that shortsighted?

XBox is huge. It's becoming the media center for an American Consumer
household. That means paying $60/year just for the "privilege" of watching
Netflix in HD through your 360.

Wait 2-3 (or 4 or 5) years where a Windows Phone can play an XBOX 1 game or an
XBOX 360 game in your hand. Wait until Microsoft comes up with something like
Apple's AirPlay where Windows Phone apps can utilize a full 1080p screen.

Wait until they integrate more cloud services with the 360. And unveil their
own Siri. Or make it so your XBOX 360 can message your phone every time a
certain trend on Twitter is mentioned (agent based voice search).

Wait until an entire household of teenagers gets used to talking to their 360
to control it, having it integrate with their phones, and having it manage
their social networks and cloud services, AND play some amazing games....

I have a feeling the 360 and the whole Xbox line is going to a very valuable
investment and one of MS's cash cows. All of the "convergence" waves Apple is
currently riding are also there for Microsoft to ride...

~~~
flomo
Shortsighted? They've been selling Xboxes for 10 years with almost no upside
to date, so I'm certainly not looking at the short term picture. But I'll take
your advice to wait for (something), because I'm certainly not buying MSFT in
their current state.

------
nailer
Isn't a Chapter 11 technically _protection from_ bankruptcy?

~~~
dredmorbius
The loser in bankruptcy is the bank. The etymology of the term comes from
"banca rotta" (Italian), meaning to literally break the bench (table) from
which an early bank operated.

Technically, bankruptcy is a discharge of debts and financial obligations. If
there are funds available, there may be a fractional payment of the nominal
value of a debt (what you hear as "pennies on the dollar" in the financial
press).

What's also literally happening is that money wealth is being destroyed,
insofar as the debts of of debtor are considered assets to the creditor, and
that the creditor can make loans on the strength of those assets.

The bank (or other creditor) has to wipe out the loan or lien. Literally, the
value of these is reduced or zeroed out.

Debt forgiveness has an ancient tradition. It's part of some of the earliest
legal codes (debt sabbaticals would occur every seventh year), and is included
in the Catholic version of the Lord's Prayer, though protestants generally
exchange "trespasses" for "debts".

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mathattack
Amazing it took this long. I can't remember the last time I used regular film
or a modal camera. I suspect when Grandma and Grandpa got digital and started
sharing on Facebook, they were done.

It's a shame because like their neighbor Xerox they were technologically
advanced. They were big in digital pre-2000 and slammed on the brakes when
they hit short term losses.

Chalk it up as another case of large firms struggling to innovate. Makes Apple
seem all the more impressive.

------
redsymbol
Kodak has starting to function more like a patent troll in recent years, as it
seemed to lose its ability to create profits the old-fashioned way. It's gone
from a truly all-around amazing company, to an increasingly parasitic force in
the world.

Very sad to watch.

------
imajes
Point of order, Kodak didn't exactly file for what people traditionally
associate with 'bankruptcy'. Chapter 11 is an entirely different beast. In the
future, it's best to mention that.

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mbesto
RIMM to follow.

------
domwood
This is kinda sad, I sorta hope they pull through. Companies like Kodak have
really struggled to remain relevant, and it's not _really_ their fault.. yeah,
they made a decision 20 years ago, but for it to bite them on the arse 20
years later is just not nice. It's like fooling around with someone on a
Saturday night, forgetting about it and then finding out you've got a kid 20
years later.

