The Eastman Kodak company reported its financial results for the 1st quarter of 2010.

"Eastman Kodak Company (NYSE:EK) today reported first-quarter earnings from continuing operations of $119 million, or $0.40 per share on a diluted basis, on sales of $1.933 billion. This represents a $479 million year-over-year earnings improvement and reflects a previously announced intellectual property transaction and significantly improved operating results across all of the company’s key business segments."

Sounds okay, but what caught my eye was the headline a little later from Standard & Poor's which read:

"S&P Lowers Opinion on Shares of Eastman Kodak to Sell from Hold"

S&P goes on to say "We are concerned that declining film sales will hurt core cash flow and stifle future investments, especially in the consumer products arena. Additionally, we expect the consumer inkjet segment to remain unprofitable in the near-term despite rising sales."

Kodak's Chief Marketing Officer and Vice President, Jeffrey Hayzlett speaks with mom bloggers about social networking in the Kodak booth at PMA2010

In February I attended the Photo Marketing Association's annual trade show as I've done for years. As always, Kodak has a large booth near the entrance. This year it was directly across from the Fujifilm booth and next to the HP booth. That in itself was a interesting contrast that I'll get to later.

Social Media, Twitter and Eastman Kodak

One of the activities in Kodak's booth was what they called the "K-Zone". It was a stage in the center of the booth where they were having a number of panel discussions. Looking at the line-up it was clear that the goal was to inspire Kodak's retailers who would be visiting the booth to use Kodak products and services to build or keep their businesses going.

What I took as one of the main themes for the Kodak booth was "Social Media". Social media or social networking are two of the buzz phrases that are currently in vogue and Kodak seemed to be running hard with them.

Their opening panel discussion was titled "Tweet That! Using Social Media to Grow Your Business" this was followed by "Moms Know Best", a panel of "mom" bloggers who were discussing their use of photos with Jeffrey Hayzlett, Chief Marketing Officer and Vice President of Eastman Kodak.  That's what's pictured above.

Do they even bother with film in their booth anymore?

Now let's talk about some things in the Kodak booth that I found disturbing and why no one should be surprised to read that declining film sales might be an issue.

In years past when film was king there were displays all over the booth showing all types of film and single use cameras along with the silver halide paper that was used to print images from film. Over the last few years I've noted as digital imaging has taken over the area devoted to film has gotten smaller and smaller. This year the area amounted to a small glass topped inset in the top of a small counter near the back wall on the far right side of the booth as pictured above.

The only real film news from Kodak was that a film introduced in 2008, Ektar 100, would now be available in 4x5 and 8x10 sizes as well as 35mm and 120 mm roll film.

The two main brochures to be found should clue you in

Trade show booths almost always have racks of handout brochures on their products. In walking around Kodak's booth I found just two. One was "prints in, profits out!" that promoted Kodak's s1220 Photo Scanning System for retailers. The other brochure was "Social Media Tips".  Note only one of those is a product. 

Now maybe in the back rooms where the true work of a trade show booth gets done there were more available for the buyers that are the life blood of a trade show like PMA's, but the message for Kodak in 2010 could be surmised from those two brochures as the importance of scanning customer photos and using social media. Last I checked, while Kodak is on Twitter, facebook, YouTube, flickr, and other blogs I don't think any of those are Kodak products.

A visit across the aisle to the Fujifilm booth was very telling

Now to contrast what was going on in Kodak's booth, all you had to do was cross the aisle and visit the Fujifilm booth. Fujifilm, like Kodak, is just as challenged by the onslaught of digital imaging, but they still act like a photo imaging company.

For starters, Fujifilm actually introduced a high end 120mm roll film camera, the GF670 Professional. And they had brochures for it. I was told in the booth that this introduction should be taken as evidence of Fujifilm's commitment to stay in the film business.

Seeing a beautiful new camera might make someone a believer. In fact, one of the folks over in the Kodak booth confided in me that they were actually seriously considering buying one.

As to film in the Fujifilm booth, it was a lot easier to find. There was a large two sided display of their instant picture film and cameras as well as a counter with a big window displaying lots of their film.

And as for brochures. There were lots of product brochures and tech sheets everywhere. On one wall alone there must have been racks for at least 4 dozen devoted to their film, paper and cameras.

Showing and selling digital cameras, two approaches

Both Kodak and Fujifilm are in the camera making and selling business, but if you measured how important it is to each of them by the number of samples on display, the space in their booth devoted to displaying them and the number of company representatives available to demonstrate and answer questions you might conclude that Fujifilm is a lot more serious about that area of their business.

 

Kodak had one low rise display with four or five cameras on each side and few reps near them. In contrast Fujifilm had at least 3 counters with 2 to 3 reps behind multiple samples of each of their products taking up at least five times the space.

Real prints from film

The photo on the left was taken in the aisle behind Fujifilm's main booth and are samples of prints made with Fujifilm's film printed on Fujifilm paper. The photo on the right is a similar shot where Kodak has opted to use "mood" images as wall paper instead of Kodak photographic prints.

One of the comments that I made to one of Kodak's public relations senior staffers was that there were only about five sample prints from Kodak products on display in the whole booth. The rest of the images were what I'd call "mood" images on black walls. The response I got back was maybe that was a mistake they'd work on for next year.

In contrast a lot of friends were telling me to be sure to look at the outstanding images by photographers who use Fujifilm products that were hanging on walls through out the Fujifilm booth and they were right in that they were gorgeous images.

It was very plain to see how important images made and printed on Fujifilm's products were to their company compared to the effort made by Eastman Kodak to showcase the film and print paper products they still make.

It wasn't just Fujifilm that was making folks wonder what's up with Kodak, but HP

In the left photo taken in the HP booth is a display of wedding related items that can be produced using HP products. In the right photo HP demonstrates the different types of papers that can be used in their printing systems and the results that can be produced.

What caught my attention in the HP booth were all the displays of prints and images that in years past I would have expected to see in Kodak's booth like weddings, sports, and backlit images you might see at a movie theatre or in a department store cosmetics department. It sure looked like HP was getting a lot of attention with their hands on demonstrations like the print on stretched canvas above.

HP's booth featured lots of products with hands on demonstrations that directly compete with Kodak in markets that I'm sure ten years ago Kodak believed few others had strength in like weddings and large prints.

So what should you do with Kodak?

The Kodak booth at PMA 2010 whether intentionally or not made a strong statement about what's important to Eastman Kodak in 2010 and it didn't look like traditional imaging was one of them.

I think Kodak is a great brand name with an impressive history that has moved on to other things like inkjet printers as S&P's comments pointed out, but printing text or copying certainly isn't the same as leading as Kodak has done for most of their 130 years.

I'll leave it to S&P and others to give investing advice, but I'd have to agree with their concerns.

 Dave Dornlas

May 28, 2010