New Kodak Chairman Appreciates the Big Picture
Faint hearts don’t win world markets is but one of the morals you can draw from last week’s big story of Eastman Kodak tapping Motorola’s chairman to lead it back to prosperity.
Short-term success seems assured. That George Fisher, who turned down the top job at IBM earlier this year, accepted the chief executive’s post at Kodak tells you the photographic company is in better shape than the computer maker. If Fisher can cut costs even moderately, he’ll soon have Kodak earning healthy profits.
The better news is that the 52-year-old Fisher, an engineer and mathematician, has a long-term vision for Kodak. He sees its photographic capabilities combining with computers for a prominent role in the emerging information industries.
Fisher could get really rich. His compensation will be tied to Kodak stock, which jumped 10% to $63.75 at news of his appointment--its highest price in six years. Financial analyst Brenda Lee Landry of Morgan Stanley gives Fisher a reasonable chance to boost Kodak’s earnings to $5 a share in the near future--which could move its stock toward $100 a share.
Yes, but what does Fisher’s getting rich mean to you or to Kodak’s employees, who face yet another round of cost-cutting, the sixth cutback in a decade for a once-outstanding company?
It means plenty. A company like Kodak is important to the economy psychologically as well as technologically and financially. Its problems mirror all of U.S. industry’s halting responses to competition in the 1980s and gradual recovery at present.
Choosing Fisher shows that Kodak, and by extension U.S. industry, is determined to regain the confident edge it once had.
The venerable Rochester, N.Y. company lost its nerve in the 1970s. Founded in 1884 by George Eastman, the inventor of amateur photography, Kodak dominated camera and film markets for 90 years by staying a step ahead. In the 1960s, Bell & Howell and duPont teamed up to enter the business by bringing out a superior film, only to find Kodak reaching into its lab and coming up with the even more superior Kodacolor within six weeks. The competitors threw in the towel.
But then Kodak met foreign and technological competition in video cameras from Japan and didn’t know how to respond. Because it was not film, Kodak’s befuddled managers saw video as an electronics business, not a picture one. “We didn’t want to make television sets or recorders,” Chairman Kay Whitmore explained later.
So they did practically nothing and shortly lost their edge in photography. When easy-to-use 35 millimeter cameras appeared from Japan in the early ‘80s, Kodak didn’t have the ideal film for them. Fuji did and stole a lead in the market.
A long siege of restructuring followed, with jobs lost, earnings declining and employees made insecure as management tended Kodak like an invalid, clucking about business “lost to this country forever.”
Defeatist at home, Kodak was weak-kneed abroad. Its market share in Japan and rapidly developing Asia is not what it should be. Finally, Kodak’s management tried diversification and paid $5 billion for Sterling Drug in 1988, sparking the shareholder revolt that has now asked Whitmore to leave and brought in Fisher.
Significantly, Fisher last week cited the Japanese market as a growth opportunity for Kodak. He comes from Motorola, a company that doesn’t let itself get pushed around. Motorola raised a ruckus on both sides of the Pacific, and won its point, when Japanese regulators tried to keep its cellular phones out of Osaka and Tokyo.
At the same time, it’s no mere jingo. When Motorola needed to learn semiconductor manufacturing technique, it formed a partnership with a leading Japanese company, sharing its knowledge in return for instruction.
Above all, it’s a company not afraid of change. In a typical move, Motorola announced last week it would support mobile radio networks even though they’ll compete with cellular telephone systems. Motorola sells both radios and phones but realizes the business is in communications, not in handsets, and it’s not going to limit itself.
Similarly, Fisher sees a capability in Kodak--the extraordinary clarity, or resolution, of photographs--that is key to the transmission of text and images by computer. If the sharpness of photographs can be brought to computer images, information markets--ultimately, on-line newspapers and magazines--can really begin to develop.
At Kodak, Fisher will be able to both pay off debt and finance some new directions because the company’s cash flow--income plus depreciation--is ample at $2.5 billion a year even in poor times. Convalescing IBM is more cash strapped.
Also, Fisher, who comes from an energetic company that has incentives for all employees, did not say last week that further tens of thousands of Kodak workers would be let go. Some cuts are inevitable, but most of Kodak’s 130,000 employees should benefit from change at what is now a demoralized company.
“Life in the 21st Century is going to be different,” Fisher said not long ago, speaking about technological leadership. “We need to change the way we do things.”
That sentiment has been expressed before at Kodak. George Eastman, speaking to employees in 1926, said: “The world is moving and a company that contents itself with present accomplishments soon falls behind.” The same goes for a nation, but as we’re seeing, both can come back.
