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.
If Microsoft sat in his little "nest-egg" of basic interpreters there would be no Office and no Windows.
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.
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...
The first digital cameras for the consumer-level market that worked with a home computer via a serial cable were the Apple QuickTake 100 camera (February 17 , 1994), the Kodak DC40 camera (March 28, 1995), the Casio QV-11 (with LCD monitor, late 1995), and Sony's Cyber-Shot Digital Still Camera (1996).
It's like you are flying a plane and you know there is a mountain ahead of you, and you'll eventually need to climb, so you begin to adjust the plane ready for a climb. Suddenly a cliff appears in front of you and you crash into it.
Seems like Kodak tried investing the right area but executed very poorly. Cameras are a great business, just look at how well Nikon or Canon are doing. Cinema digital camera market is just rising by RED and recently Canon. Why a company that started and was leading camera sensor technology, OLED displays, with tons of know how of imaging technology ended up turning into selling cheap point and shoots is beyond me.