After long overhaul, Kodak pursues digital foothold

Kodak's answer has been to outsource camera manufacturing and leverage its imaging know-how and intellectual property via licensing deals. And it has splurged $2.6 billion on a promising slice of the high-end commercial printing market where the likes of HP, Canon, Ricoh, Xerox and Fuji also are doing fierce battle.

Unloading analog baggage everywhere it could, Kodak sold its health-imaging unit for $2.35 billion, rather than bring the 111-year-old X-ray business into the digital age.

Nowhere was its transformation starker than at Kodak Park, a colossal manufacturing hub north of downtown Rochester that George Eastman opened in 1891. The park has shrunk from 1,600 acres to 700 over the last decade, with scores of buildings sold off to developers. And beginning last July, five mammoth plants where silver halide-based products were made or stored were reduced to rubble.

"It's an extremely sad and shocking time" for longtime employees and retirees "when buildings that size vanish inside 10 seconds," said Robert Burley, a photography professor at Ryerson University in Toronto who came to see an 89-year-old paper products plant implode in September.

"Even though these technological transitions in the end take 10 or 20 years to happen, this one is happening very quickly. It's remarkable," Burley said.

Kodak has high hopes for its inkjet photo printer that uses inexpensive ink cartridges and is targeting $1 billion in sales by 2010 in a $16 billion home-printer market dominated by Palo Alto, Calif.-based HP. And in May, it aims to shake up the commercial market with a 2,000-page-a-minute, highly customizable inkjet machine that delivers offset-print quality.

That would put it in closer competition with Xerox, the Stamford, Conn.-based office-equipment imaging company that also was founded in Rochester, in 1906, and still has its biggest factories here.

"Don't be grossly shocked, two years out, if you find Kodak and Xerox together because each one wants to get on the other guy's turf," Yannas said.

Kodak's meteoric rise to blue-chip status in the 20th century was "emblematic of what America is capable of," so the perils it faces invoke "a wistful worry," said Mark Zupan, dean of the University of Rochester's Simon Graduate School of Business Administration.

"You're starting to see more of an edge to Kodak," Zupan said. "But just one or two successful innovations aren't going to do the trick. It takes aggressiveness, ingenuity and a willingness to take risks."

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