Updated: 6pm to include comments from Kodak’s Jeff Hayzlett. 7:30 to include video statement from Kodak CEO Antonio Perez.
The Wall Street Journal reported today that Kodak is looking to divest its Nexpress business through a sale or partnership:
Now Kodak says it can't afford to keep such businesses as Kodak Gallery and its high-end digital press business, NexPress. It plans to seek partners to share the costs or possibly sell the businesses. It will also limit investment in semiconductor image-sensors and seek a partner.
It appears that the WSJ is basing this on Kodak's announcement from yesterday on the investor meeting which stated, Image Sensor Solutions and Kodak Gallery in CDG, Electrophotographic Printing in GCG, and OLED are businesses in which Kodak has a unique market position but which require additional investment in order to achieve their full potential. Kodak will reposition these businesses by pursuing alliances or other business model changes to reduce risk and enhance revenue and margins."
Kodak responded on Twitter to the WSJ report by directing people to read a story at Forbes.com which included a comment from Kodak CEO Antonio Perez on a potential divestment, "Given this environment we are not going to be able to invest in the whole portfolio, We are not thinking of divesting any of those businesses," he added. "We have to find a way to continue to be in all those businesses without all the risk."
Kodak has also released Jim Hamilton at InfoTrends from non-disclosure on the Kodak's go-to-market strategy for the Graphic Communications Group. At the InfoTrends' blog Jim shares the strategy:
There will now be four strategic product groups in the new GCG: Prepress Solutions, Business Solutions & Services, Digital Printing, and Document Imaging. What you will note first about this arrangement is that the toner-based and inkjet-based digital printing groups (NexPress, Digimaster, and Versamark) are all under common management. From this move alone it is clear that rather than being set up to divest, this structure more tightly integrates the various digital print organizations into Kodak GCG.
Based on this report I think we can safely assume the Wall Street Journal report to be wrong. A recent article here at Print CEO by Andrew Tribute shows the lack of understanding financial analysts can have when looking at this industry.
Even though Kodak is restructuring their graphic communication business to better serve the market, they still have to contend with the current economic situation. Last week, Kodak reported a preliminary loss from continuing operations, The Graphic Communications Group full-year sales were $3.334 billion, a 2% decline from 2007. The company said it would cut worldwide employment by between 3,500 and 4,500 positions during 2009, approximately 14% to 18% of its total workforce.
After we initially published this post, Kodak's Jeff Hayzlett contacted Print CEO to provide additional information on the investor meeting. Hayzlett said, "A lot of people are talking about what was said regarding Kodak’s digital print business in a meeting with investors Wednesday. Most of it is coming from people who weren’t there. I was, so let me tell you what really happened and what it means for Kodak and, more importantly, our customers."
He reiterated Kodak Chairman and CEO Antonio Perez commitment to Kodak’s electrophotographic line up, "Antonio Perez described our color and black white electrophotographic portfolio as one of Kodak’s businesses that is being transformed–businesses that “require additional investment in order to reach their full potential.” He said Kodak sees a better return by “continuing in those businesses.” In fact, Antonio was asked directly about Kodak’s intentions with its KODAK NEXPRESS and DIGIMASTER system businesses, and he said, “…we’re not trying to divest those businesses.""
On the possibility of a partnership, Hayzlett continued, "We want the NexPress and Digimaster system portfolios to achieve their full potential faster by combining our strengths with someone else's complementary strengths. We are looking to strengthen our toner business and to extend the business reach through our own continued investment and through additional partnerships. We’ve been in conversations since mid year 2008. Obviously, we could see that the third and fourth quarters were going to be very poor. When we made the announcement that we were going to lower dramatically our manufacturing volumes, we started to think, what else can we do to lower our investment. We won’t be able to afford this level of investment in 2009 without market growth. Obviously, we know the industry well. We know all the partners that have complementary assets and will have interest in collaborating with us."
Hayzlett ended with, "Anything else you hear is wishful thinking from people who’d rather not compete with Kodak in digital print."
Update 2. Kodak has posted a video statement from Antonio Perez:
Discussion
By Adam Dewitz on Feb 05, 2009
WSJ ran a correction tonight at 11PM: "Kodak says it doesn't plan to sell Kodak Gallery, NexPress or two other operations. Instead it plans to reposition them by finding partners to share their costs, licensing technology or other means. The article incorrectly said Kodak was considering selling the businesses."
By Andrew Tribute on Feb 06, 2009
I too am in a similar position to Jim Hamilton in being pre-briefed under NDA by Kodak on its future plans. I too have been released by Kodak from this NDA to allow me to comment today. There is little more to say from what Jim Hamilton stated, and I agree with everything he has said. Kodak has no plans to divest itself of the Nexpress and Digimaster operations. This operation is fully integrated into the overall digital printing operation and is not set up to be a separate operation.
All reports and surveys of the future print market from a variety of organizations show a continuing and substantial growth of digital printing. With its inkjet, electrophotographic and workflow operations Kodak has the widest product portfolio in the industry. It is not just a one-pony operation with its inkjet technologies. In fact in the past year the Nexpress product range has been significantly extended and it is highly competitive against its major competitors. With future enhancements to come, some of which were indicated by Jim Hamilton, the range will become even more competitive in the future. It would be strange if Kodak were to contemplate getting rid of this operation when it has the real potential for major growth. What Kodak stated was that they were looking at ways to transform this business through exploring potentials of partnerships and alliances as well as looking at segmentation and licensing opportunities. As Jim Hamilton indicated this could be through further agreements with companies like Canon or Ricoh to possibly widen the product range or open up new distribution opportunities.
This highlights a problem I am seeing on a worldwide basis, and that is the quality of journalism is getting worse. In this case the journalist reporting the Kodak briefings either did not understand his brief and the markets, or was incompetent, or possibly asleep. We need to be able to trust certain publications, such as the Wall Street Journal, but the media appears these days to want to sensationalize everything. There is a major debate in the UK at present on the subject of how much impact the media has had into pushing the markets into recession. When influential media such as the Wall Street Journal jump to incorrect conclusions rather than reporting facts, then this can only be to the detriment of the all industries. I previously have commented on the lack of knowledge of the financial analyst community and now I see a similar lack of knowledge in the media.
I’m pleased to see that the Wall Street Journal has retracted its comments and put out a correction, but no doubt some damage has already been done. One only has to look at their blog and one sees ridiculous speculation and comments being made on the subject of the Kodak article. Bad journalism sews the seeds that can destroy companies. The media has done little to help in the current financial situation and it needs to raise its standards if it is to retain the respect of its readers.
By John on Feb 06, 2009
sell it back to Heidelberg, its a money pit.
I would hate to own one
By Michael Josefowicz on Feb 06, 2009
Adam,
Great work.
I love it when Print CEO gets it right and the WSj gets it wrong, than has to fix it. Couldn't have happened without you.
By Scott on Feb 06, 2009
Great work gentlemen. You are correct in that there has been damage done. Damage that has created a perception, that as we all know is tough to retract. In times like these, we all need to be more responsible in how we conduct our business.
By Dr Joe Webb on Feb 06, 2009
Kudos to Jeff and Kodak for getting right, and notice what channels they used -- new media -- and aggressively. And they even used facts.
Aside from the bad journalism, don't let the companies off the hook either. I was at a GraphExpo event where the CEO of a company got up and said their surveys showed print was growing (mirrors something the head of a trade association keeps saying). We need companies to assert the realities of the marketplace, and for too long Kodak didn't, and for the past couple of years they are far better at it. We need more honesty and no spin from the corporate PR folks overall. No wonder journalists and companies hate the new media. It's the smart companies and executives who learn how to use it, honestly. Jeff H has been ahead of the curve on this one.
By Bob Raus on Feb 06, 2009
Sensationalism is a foundational strategy of the news industry. It’s what “sells newspapers.” However, it is clear this particular reporter was way off the mark. Is it possible that this reporter hasn’t made the transition from Kodak being a film producer to a major digital conglomerate?
If you look at the analyst reports and predictions, it is clear that Electrophotography (toner) and Inkjet are the only two printing technologies slated to grow over the next 10 years. In fact according to the PRIMIR 2007 Worldwide Market for Print Report, when you factor in projected inflation – all other printing technologies Offset (sheetfed, coldset, heatset), Gravure, Flexo, Screen, Letterpress and others all decline. Compare this to 147% growth for toner and 97% growth for inkjet and you can see why Kodak, Xerox and others are investing heavily in these technologies.
Obviously market factors have changes since the report was put out – but if anything - the economic recession will level-off and more likely accelerate the decline of the more traditional technologies. Given this basic knowledge, how could the reported expect that Kodak would simply divest of its electrophotography division? Perhaps the reporter was borrowed from another industry for the day?
Major Kudos to Jeff Hayzlett for quick damage control and clarification. It isn’t often we see a correction so swiftly from the WSJ. Just remember, there is no such thing as bad publicity…
By Harvey Hirsch on Feb 06, 2009
From what I've seen, Xerox is also finding it hard to sell their iGen's. Can this be another nail in the coffin for big white elephants against small footprint systems that are more robust? Hmmm.
By Cary Sherburne on Feb 06, 2009
Kodak's response to this "crisis" was very interesting to me for a number of reasons, not the least of which is their ability to rapidly leverage social media for maximum impact. Kodak and Jeff H are to be commended for their leadership in the use of new media, not only to quell the current firestorm, but in general. I don't see many of the other suppliers to our industry leveraging social media as effectively. The events of the last two days demonstrate how important this can be, and having the process in place to move quickly and take advantage of the various media seems like it should be part of crisis planning for any public company these days, let alone the potential marketing benefits. Remember how we all laughed when the first Kodak video "leaked" out on YouTube? In the end, Jeff H had the last laugh.
Kodak also hosted an old-fashioned conference call with the trade media this morning, hastily convened. Kevin Joyce, Worldwide VP of Sales & Marketing for Kodak's Digital Print Solutions Business, did a good job of presenting the Kodak position. Although he declined to specify job cut, cost reduction and R&D investment allocations by business unit due to the way Kodak reports its financials, he was very clear that the company considers ongoing investments in both toner and inkjet to be critical. He was also quick to point out that this was not necessarily to the detriment of its offset-related businesses, especially with the growing adoption of hybrid manufacturing in our industry that requires a unified workflow.
As Dr. Joe has said many times, when we come out of this downturn, it will be a very different industry. Executives should be paying attention to this "new media stuff" and examples like Kodak as they think about how they are going to get through this difficult year and come out of it stronger, more nimble and more in tune with what customers are really looking for.
Kodak's presentation at the investor's conference and http://phx.corporate-ir.net/phoenix.zhtml?c=115911&p=irol-EventDetails&EventId=1926541" rel="nofollow">the transcript can be found here, if you want to view the source.
By Michael Mittelhaus on Feb 06, 2009
As a main advice, I would say to any financial analysts trying to advise our industry: Shut up!
They´re "advising" Heidelberg to go into Digital Presses to get out of the crisis and tell Kodak to get out of Digital Presses.
These advices shed some light on how the current economical and financial crisis was created by these kind of experts.
But back to our industry:
What Kodaks statements also say, and what should be underlined, that Kodak is no longer willing nor able to push Electrophotography and Toner presses forward. That is - after Heidelberg - the second Big Name in the industry to say so.
To call for alliances seems to be ok, but what if nobody jumps on the band-waggon?
Is there any company in the current economical situation willing or able to assist Kodak?
So I really wonder, what the future of the Nexpress will be and if there´s any.
And by the way, IMHO this sheds also some light onto the fact how light-weighted some of the prognosis on the future of digital printing were and are. Maybe the current crisis will cure these as well.
By Erik Nikkanen on Feb 07, 2009
“Management Speak” That is what managers or politicians do to present the best picture of the situation. They will do this in public or privately to trusted contacts. Either way, the purpose is not to present the most truthful story but one that best benefits the company. It is not their job to tell the whole truth. Their job to do things that benefits the company. Do not expect the whole truth from managements.
You will never hear CEO’s tell their investors that they plan to lose money or even plan to go bankrupt but sometimes very shortly after positive things are proclaimed, many bad things happen. You will never hear them tell their potential buyers of a business unit that we want to sell this pathetic dog because we know we will not be able to make money on it and we want to unload it. Do not expect the whole truth from managements.
Company spokesmen can state eloquently what plans they have but companies do not always have much control over what they would like to do and now it is even worse. There is probably little control over what can be done. If you had a great business unit, you wouldn’t want to share it and if it is not so great, no one will come to the table unless the deal is very sweet for the partner.
So the WSJ corrected their report and now states that, “Kodak says it doesn’t plan to sell Kodak Gallery, NexPress or two other operations. “ In other words, Kodak is hoping for the best but has no idea what will really happen. In the end, the WSJ may have got the report wrong of what was planned but got it right for what will happen. Only time will tell.
The idea that outside analysts should not look at the printing industry is absurd. They may not always get things right but inside analysts are not that much better because sometimes they are too close to the insiders. The idea that the printing industry is somehow fundamentally different is absurd but that seems to be the view with respect to business issues and process issues.
In my opinion, journalists everywhere, bless their hearts, get the details wrong.
I never believe everything management says. It is not that they are lying. They are in Sales and are selling a position as best they can.
By Quincy Allen on Feb 10, 2009
While the reporting error is regrettable, I am glad to see a continued discussion revolving around what lies ahead for the printing industry. It’s easy to focus on the negative in today’s marketplace, but what we really need to be doing is looking at the future – a future full of digital prints. As the 2007 Worldwide Market Print Report that Bob Raus refers to in his earlier post states – digital is a bright spot for our industry. At Xerox, we’ve grown a lot by listening to our customers’ needs and by offering the digital technology they need, coupled with workflow solutions and business development tools necessary to succeed in a competitive marketplace. It’s great to see that so many participants of this community are on the same page. Hopefully through continued conversations like this we can educate others, be it business reporters or everyday print consumers, about the future of digital.
By Michael Josefowicz on Feb 10, 2009
Quincy,
Thank you for weighing in. It's great that a top Xerox executive would take the time.
But here's the problem on the ground, IMHO.
While in general the digital future does look very bright, it's not at all clear from the ground where commercial printers are going to fit in to that future.
I'm seeing many large institutions, both in the profit and non profit bringing the equipment in house. Good for Xerox, not so good for commercial print.
I know there is a mantra about becoming "marketing solutions providers," but given the major disruption with people who are marketers full time, is it plausible to believe that commercial printers, whose hard won expertise is in Printing stuff, will be able to compete with IT companies and marketing professionals who continue to cut prices to deal with their own very difficult situation.
Meanwhile, the Managed Print Services market continues to grow nicely. Good for Xerox. Not so terrific for commercial printers.
Any prospective from Xerox you can share to get your viewpoint on how to deal with these problems, could be invaluable.
Thanks.
By John on Feb 11, 2009
its a risk investing on this nextpress machines, toner base digital offset is far from the traditional offset output, considering the how it is on paper. If it would be liquid base ink it would be much more efficent to sell....
By Ken Smith on Feb 13, 2009
I've been recently impressed by the latest offerings from Xerox and NexPress but, unfortunately, the inherent issue of trying to control multiple toner densities will never go away, thereby yielding good looking print? Yes. but consistent print? Difficult, if not outright no. Keeping one solid ink density true (per color) is the life's work of any press operator, whether it be Heidelberg, Komori, Indigo or otherwise. This limits the quality expectation and in turn any serious inroads to the offset printing market, be that offset hot or cold.
By obi on Feb 13, 2009
Lets face it: Nexpress is on a slow way to become history. The system is great for niche applications (nexpresses have a great print format) but the quality in screening and color consistency is not good enough to be a valuable add on to offset. Dry toner has its limits. From my point of view the systems where simply wrong positioned.
Now they don't know what to do. Well a first step is done, since Kodak announced that Ricoh will take over sales and customer support in Europe. This will not help to built up reputation.
By Michael Josefowicz on Feb 13, 2009
@Ken,
Have you had a chance to look at the Igen4? According the press releases, they say they have figured out consistency and repeatability.
Anyone have an experience in the real world?