Kodak Sells Gelatin Business

[Newt_on_Swings]

I read this today on the train as well. ugh dropping in someone who specializes in their intellectual property at the helm of Kodak now only signifies the sell off will continue. Does no one there at Kodak understand you cant continue to recoup losses by selling off key components, you can only shed so much before you make the business inoperable. You need good products that are in demand, you need innovation, fresh ideas, and new talent, things that will get the business community to reinvest in them, and bring up share prices. The way they are handling this makes me mad.

 

[Ektagraphic]

Will this change much for us?

 

[lxdude]

I don't think so, except that Kodak will be buying its gelatin from someone else. As Eastman Gelatine was a subsidiary company, EK would most likely have bought its gelatin from EG like any other customer, even though EG's profit from that would go eventually to its own bottom line.

 

[Mark Fisher]

Very few companies are vertically integrated anymore. They try to focus on what their core skill is rather than be distracted by everything else. I'd guess that Fuji nor Ilford have gelatin divisions. That said, I do wish that Kodak would sell their film division to someone who would see it as their sole business and feel they need to make it work. I think there is a viable, but smaller, business there to serve the photography market.

 

[cmacd123]

Not as current but this article on Reuters will be somewhat interesting..

As Kodak struggles, Eastman Chemical thrives

http://www.reuters.com/article/2011...+Technology)&utm_content=Google+International

 

[cmacd123]

I'd guess that Fuji nor Ilford have gelatin divisions.

I have a copy of the 100th anaversersy issue of "Kodak Studio Light" which has a listing of the core Kodak Principles. one of them is to "control an alternative"...

Story goes that in the early days Kodak all of a sudden could not make film in rochester, every batch was a failure. Eastman himself took a small crew to London with sample of all their supplies and made sample batches there. after testing they discovered that the Gelatin was the problem. Some cows had switched to a different feed and there was a different mix of trace chemicals.

The answer was better refining and Eastman bought TWO factories that could make the stuff. Eastman Gelatin being one. and I think the other was in the midwest

George Eastman would have never set it up that all the film was made in one building, even if the volumes dropped as much as they have. (or course he would have also grabbed the digital bull by the horns and made sure that the company never let Canon and Nikon have a chance at the mass market. I recall the sales blurb on my EK-6 Instant camera mentioned that Kodak made the special chips for that.) he would have work very hard to only leave his competitors the middle market.

 

[John Shriver]

They may well thrive out of under the shadow of Kodak's management. See this article, which discusses how Eastman Chemical has changed from a fat lazy Kodak subsidiary to a well-managed thriving globally competitive company.

Kodak's near-monopoly status in the film business, and the resultant high profit margins, allowed bad business management to thrive undetected. Digital photography was only one of the Kodak innovations that had no return on investment. They dropped many fine business lines because they weren't as high-margin as film.

 

[Ektagraphic]

Not as current but this article on Reuters will be somewhat interesting..

As Kodak struggles, Eastman Chemical thrives

http://www.reuters.com/article/2011...+Technology)&utm_content=Google+International

I'm sure that it's not D-76 and Dektol that are keeping the chemical business up.

 

[MattKing]

I'm sure that it's not D-76 and Dektol that are keeping the chemical business up.

Eastman Chemicals made and make chemicals - not photographic chemistry.

Eastman Kodak sold its photographic chemistry business a couple of years ago - the purchasers (Champion? ) also purchased a licence to use the Kodak name on the former Kodak products they manufacture

 

[Stuggi]

That's the problem when you have a business that's a global leader in a certain field, small parts of the business that are not part of the core-business start to look unattractive since the profits are so small compared to the core-business, not maybe in a sense of return on investment, but in dollar amounts. This then leads to either two things, selling out the "unprofitable" part, or keeping it and usually neglecting it. Then, when the core-business looses ground, the increased overhead from the big company's bloated management structure eats up the "unprofitable" side business profits, resulting in a sell out. What should have been done in the first place is restructuring the side business as a separate company, so it can function completely separate from the owners, and so that the bookkeeping actually shows how profitable it is, when the parent company's overhead is removed from the equation.

 

[Mark Minard]

Kodak's near-monopoly status in the film business, and the resultant high profit margins, allowed bad business management to thrive undetected.

What an incredible story it would make.. the APS and disc debacles, unbridled employee benefits, the culture Kodak created. Either an insider would have to pen it, or a well-known biographer relevant players would be willing to talk to (thinking of Ron Chernow here though of course there are many others).

 

[Neanderman]

That's the problem when you have a business that's a global leader in a certain field, small parts of the business that are not part of the core-business start to look unattractive since the profits are so small compared to the core-business...

Proctor and Gamble, who is headquartered in my adopted home town, has spent the last 10 years slowly selling off or discontinuing it's 'second tier' brands and any products that didn't bring in $1 billion (thousand million, for those outside the US) per year and trimming its market to a few core categories. Well, then the crash of 2007 hit and they found consumers were abandoning their upper tier products and buying from competitors. So now they are re-introducing some second tier items...

Alas, I don't expect the same from Kodak.

Ed

 

[Neanderman]

Eastman Kodak sold its photographic chemistry business a couple of years ago - the purchasers (Champion? ) also purchased a licence to use the Kodak name on the former Kodak products they manufacture

2006 - www.championphotochemistry.com/milestones.php

 

[David A. Goldfarb]

Threads merged.

 

[cmacd123]

small parts of the business that are not part of the core-business start to look unattractive since the profits are so small compared to the core-business, not maybe in a sense of return on investment, ..... keeping it and usually neglecting it. Then, when the core-business looses ground, the increased overhead from the big company's bloated management structure.

I think you are really seeing what is sometimes called the Conglomerate Effect or Conglomerate discount. Big companies are much harder to manage than folks think, ITT at one time owned both Wonder Bread and Sheraton Hotels, as well as Military suppliers, a car rental outfit and a few others. Management thought that if they applied MBA methods that all businesses could be managed by the numbers.

Someone else mentioned P&G who actually at one time would make several brands of the same products and let them compete with each other so that competitors had an even steeper learning curve. I recall the news a few yaers ago when the folks who make "Jergins" soap took over IVORY on a contact basis including the P&G factory that made it.

General Electric is sometimes described in the Financial Press as a Bank that happens to make Locomotives and Air Craft Engines. You will find them in the last several issues of teh fotrune 500 under "Diversified Financials"

Much merger activity is more concerned with the Management having a bigger company to play with so that they can justify a higher paycheque.

By that standard Kodak actually comes off not looking bad, they were a leader, who paid their staff well and were at the leading edge of the Photography business as shown by the fact that it was their labs who claim fame for inventing the digital cameras. Their size meant that they have not been nimble enough to take advantage of the leadership they had in digital. Of course, as digital was at first very expensive to produce they concentrated their efforts on applications where the immediate trasmission of the image would comand a premium price (Sports Photography and Military/Space Applications)

A cultural shift were many folks don't make prints of their pictures also has made their consumer business extra tough.

 

[cmacd123]

Proctor and Gamble, who is headquartered in my adopted home town, has spent the last 10 years slowly selling off or discontinuing it's 'second tier' brands and any products that didn't bring in $1 billion (thousand million,
Ed

GE did the same a few years back, dumping any business where they were not either Number 1 or Number 2 world wide. These days any consumer products you see with the GE name are probably made under licence. they even bought RCA (founded by GE but sold off for anti-trust reasons) and promptly split it up. Selling the TV set business to Thompson of France, and keeping NBC, Buying Universal studios from Vivendi and then a few years later selling NBC Universal to Comcast. In GE's case they make more from Banking and Leasing than they loose in such manoeuvres.

 

[Ektagraphic]

Not to get too off topic but this was on the Champion website....

"Champion Photochemistry Incorporated ("CPI"), to acquire the photochemical assets and operations of Kodak's Rochester site in the United States. A multi year photochemical supply agreement is part of the deal with Kodak for the supply of photochemicals to the US and Canada

.

How long is this "multi year" agreement?

 

[kwall]

Geez, if their market cap gets any lower, we could take up a collection and buy them out.

With 269,000,000 shares outstanding, the market cap at today's $0.69 close is about $186,000,000. Pocket change.

 

[Neanderman]

I don't think Kodak's quality will suffer. They've been making film long enough to know what they need in a gelatin and I'm quite sure they will rigorously test any gelatin (or any raw materials they buy from outside) before committing to a film run.

Quality is the least of my worries.

Ed