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Free: The Heidelberg and Kodak Deal: Good for All

On Monday March 8 Kodak announcedthat it would buy Heidelberg'

By WhatTheyThink Staff
Published: March 19, 2004

On Monday March 8 Kodak announcedthat it would buy Heidelberg's 50% share of Nexpress LLC, and its wholly owned Heidelberg Digital LLC unit. Heidelberg will receive no cash up front, but it will receive up to $150 million in the first two years of an earnout that could last up to five years. Heidelberg has agreed not to compete in the Nexpress 2100 market.

Was it a mistake for these two companies to come together to develop the Nexpress? Is Heidelberg's sale to Kodak the right thing to do now? What does this mean for the customers of these two companies?

When the joint venture was announced in 1997, analysts' projections for growth in the digital color market were very optimistic. These projections proved to be inaccurate. Whether the shortfall is due to the recession, the events of September 11, 2001, or the wars in Afghanistan and Iraq is immaterial. This was an intelligent business decision based on the facts available at the time. In light of the events that have unfolded over the past seven years and the market conditions today, it's an intelligent decision for the companies to part ways now.

Great companies devote themselves to understanding their customers' needs and finding ways to address those needs by bringing new technologies and solutions to the market. As time passes and things change, the best companies adapt their strategies to the new environment and move on.

I started my career at IBM. IBM was originally a timeclock manufacturer. They evolved from timeclocks to mainframe computers. When personal computers came on the scene, IBM developed a line of PCs. IBM has continued to evolve since then, with a growing presence in software and services.

Kodak has an historic dependence on film. Film has been very good to Kodak, but times change. Kodak is in the process of reinventing itself. It has brought in strong new management to aggressively pursue the growing digital print market. This is good for the company, its customers and its investors.

The printing industry was built on the backs of entrepreneurs and managers who thought big and refused to listen to those who said they couldn't succeed. It was built by men and women who experienced failure and came back to succeed against all odds. Wayne Gretzky once said "You miss 100% of the shots you don't take." Setbacks such as this one are a part of the process of building a great company. It may be painful in the short run, but it is evidence of a company thinking big, trying new things, and then making adjustments when the unexpected happens.

I believe that both Kodak and Heidelberg's customers are better off as a result of this transaction. Both companies are reworking their strategic plans to fit the current environment. The process of trying new things and making adjustments is a healthy one for a business and its customers.

 

 

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