The year commenced with two leading photographic companies in the news for all the wrong reasons – Olympus for its massive financial scandal and Eastman Kodak apparently on the verge of filing for Chapter 11 bankruptcy.
The latest in the tawdry Olympus US$1.7 billion accounting fraud, according to a Reuters report, is that the camera, optics and endoscope maker is considering an equity alliance with five prospective investors, including Sony, Panasonic, Samsung Electronics and Fujifilm, with the fifth being a Japanese medical equipment maker.
The report stated that agreement to inject fresh capital into the company in exchange for equity could be arrived at as soon as February.
While the camera-making division of Olympus currently operates at a loss, the value of the brand is considerable. The medical instrument (endoscope) division is on the other hand hugely profitable. Fujifilm also manufactures endoscopes and is said to have been interested in Olympus for some time.
Olympus is also suing 19 former and current executives for damages suffered over the massive, decade-long cover-up of investment losses.
The lawsuit was filed by auditors on behalf of the company and target former CEO Tsuyoshi Kikukawa, current President Shuichi Takayama, and 17 other executives that the company says participated in or knew about the fraudulent activity.
Eastman Kodak’s troubles have been widely reported and analysed, and it now seems more a matter of when rather than if it files for bankruptcy. Companies interested in its portfolio of patents, which it has been openly hawking for some time, would be inclined to wait until EK’s financial distress is even greater and the price is more negotiable.
With a share price now well under $1, the New York Stock Exchange is reported to be considering de-listing the company, which for decades and up until the mid-2000s was among a very select group of American corporations which comprise the Dow Jones index. It’s share price was once upwards of US$80.
Eastman Kodak lost 88 percent of its market value last year and the share price is now acually around 50 cents.
In an interview this week with The Australian, Ziggy Switkowski, chairman and chief executive of Kodak Australasia from 1992 to 1996 – and prior to that being groomed in Rochester corporate headquarters for a bigger role – put the 131-year old company’s demise down to an unwillngness to adapt to changing technology.
‘It’s hard to move from a high market share, high-revenue legacy business, into a new capital-intensive world where you have to compete for market share in lower margin products,’ Dr Switkowski said.
‘To make the call to go into new businesses when your legacy business is in terminal decline is a breathtakingly difficult one to make — but when your business is in that position, then you must adapt in order to survive.’
He also implied that Kodak hasn’t had the calibre of management to succeed in that ‘breathtakingly difficult’ challenge:
‘Good management will always manage terminal decline, but terminal decline will always decline,’ he told The Australian.
‘Anything that isn’t fully digitised is at risk and examples like Kodak and its old hard-copy image business show that people will not continue to value old businesses like they once did, because people are increasingly comfortable with the online and digital world now.’
Instead, the road to recovery mapped out by current Kodak CEO Antonio Perez (former head of HP’s printing division) has been to develop Kodak’s consumer and commercial printing businesses (ie, hard copy).
In the six years under his watch, Eastman Kodak has delivered loss after quarterly loss.
Yet as late as last November this man was issuing sunny predictions for the future of the once-great company history may prove he has in reality driven into the ground:
‘In relation to the recent speculation in the marketplace about the future of Kodak, I want to note that I have a high degree of confidence in our ability to execute this plan.
‘By the end of 2012, we’re going to get to this self-standing digital company.’
– One wonders where Kodak will really ‘get to’ by the end of 2012.