A Takeover of Polaroid May, Sadly, Be Best
Polaroid Corp., the company that invented and became synonymous with instant photography, may well defeat the takeover attempt launched last week by Roy Disney’s Shamrock Holdings investment company.
But, sadly enough, that’s too bad. Because any management that Disney--nephew of the late Walt Disney--installed at Polaroid could probably help the company more than the guys who are there now.
Poor Polaroid, a great invention, a household name, and yet a company that failed to become all it could have been. Polaroid has suffered failures of vision and of nerve. Its story is the sadder for being familiar, a lack of commercial ability and staying power all too common in American business.
The story begins with Edwin H. Land, the brilliant scientist who founded Polaroid in 1937 on his discoveries about the behavior of light and introduced the instant camera in 1948. The camera revolutionized photography, allowing pictures that didn’t have to be sent out for developing. Picture quality wasn’t as good as snapshots taken with Kodak film, but the exciting and convenient new product--which Land protected with 2,000 patents--won a significant market. Polaroid grew rapidly, and Land was acclaimed.
He relished the applause. In the 1960s when Polaroid stock was flying high, Land--a Harvard-educated physicist--gave science lectures to shareholders at annual meetings. He was above discussing mere commerce. “The essence of business leadership in America,” the now-retired Land told Forbes magazine last year, “is to be able to turn your back on the demands of the financial world: Its analyses are never profound.”
Which is often true, of course. But Land, too, had his blind spots. In the 1970s, oblivious to the development of videocassette recording, he had Polaroid develop an instant movie system called Polavision. When it was introduced in 1978 it was a $68-million failure.
The company seemed to lose its nerve after that. To reduce its reliance on instant photography, Polaroid diversified into computer disk drives, printers, fiber optics. None of the diversifications succeeded, although industrial use of instant pictures--ID cards, drivers licenses--brought fresh growth.
Prints More Costly
But the larger failure was of vision. Neither Land nor his successors saw beyond instant photography to the need to compete in the total market. They didn’t develop conventional cameras or film.
Yet having chosen to remain a one-product company, Polaroid failed to constantly improve that product or cut its costs to compete with the point-and-shoot 35-mm. cameras from Japan. Even today, Polaroid pictures cost about $1 a print--much more than snapshots that can now be developed at one-hour photo centers.
It’s not that Polaroid didn’t try. The company spends generously on research, says analyst Brenda Landry of Morgan Stanley, “but it doesn’t get a payout in new products.” The company may have great potential for computer graphics and the new information technologies--but its record on innovation gives little hint of that.
So why does Shamrock want it? The promise of financial gain is one reason. Next January, Polaroid may get $1 billion or more from Kodak in settlement of a patent infringement lawsuit. Also, though its profits are currently declining, Polaroid has almost no debt and a powerful brand name. That’s an attraction for the Shamrock people, who four years ago brought in new management to revitalize another big name, Walt Disney Co.
But Polaroid President I. MacAllister Booth is moving smartly to foil the takeover bid--which is for $40 a share, or roughly half the price of Polaroid stock 20 years ago when its potential shone brighter.
One strand in MacAllister’s restructuring plan is to put the Polaroid brand on conventional film and compete directly with Kodak and Fuji of Japan in the less-than-instant photography market. Smart but late, observes analyst Alex Henderson of Prudential Bache Securities: “If Polaroid had gone into conventional film 10 years ago, Fuji would never have the position (roughly 12%) it has in the U.S. market today.” But then, that’s the old Polaroid story--what might have been.
