What Does Kodak Do These Days? A Decade of Pivots Before a Huge Federal Loan

A Kodak store reopened in May in Paris, when France began to ease the lockdowns intended to stem the spread of the coronavirus.

Photo: Marechal Aurore/Zuma Press

Eastman Kodak Co. KODK -4.72% for generations was a household name in photography, the maker of “Kodak Moments” that preserved families’ most cherished memories.

Today’s Kodak moments are mostly digital, and the company has spent much of the last decade attempting to maneuver out of bankruptcy and into new business areas. The company’s latest pivot brings it squarely into the fight against the coronavirus outbreak.

Kodak brought everyday photography within reach to generations of customers.

Photo: Mary Evans Picture Library/Everett Collection

Kodak last week agreed to a preliminary deal for a $765 million government loan to jump-start production of ingredients used to make generic drugs, including the antimalarial drug hydroxychloroquine, which President Trump has touted in the treatment of Covid-19, the disease caused by the coronavirus.

The loan is the first of its kind under the Defense Production Act, which had previously been invoked to speed the production of Covid-19 related supplies such as ventilators. The loan now faces Congressional scrutiny as lawmakers question Kodak’s lack of a track record in pharmaceuticals and stock-option grants issued to executives ahead of the announcement of the loan. The company’s stock has been on a wild ride over the last week, surging from $2 to as high as $60.

On Friday, Kodak disclosed it would conduct a review of recent activity by the company and related parties in connection with the potential loan. The internal review will be undertaken for a special committee of the board by law firm Akin Gump Strauss Hauer & Feld LLP. Akin Gump advised the company during a restructuring in 2012.

John Ward, a lecturer at Saunders College of Business at the Rochester Institute of Technology, said Kodak’s roots in the chemical industry give it a chance to pull off the move into making pharmaceutical ingredients, but a lot of work remains to be done.

“It’s not a matter of turning the switch and getting into this business,” said Mr. Ward, who worked at Kodak for two decades. “There are some core capabilities there but they are going to have to make significant investments, bring in people, shift focus. it’s TBD whether they can pull it off.”

In the 1890s, some of the first women employed by the company made prints by exposing them to the sunlight, working in a penthouse space on the roof of a factory.

Photo: Bettmann Archive/getty Images

Kodak’s latest move shows how far the 130-year old company, whose founder George Eastman pledged to help make photography “as convenient as the pencil,” has strayed from its roots. Long considered a leading industrial manufacturer that attracted scientific talent to its corporate base in Rochester, N.Y., Kodak today mainly provides software and technology for the commercial-printing market.

Kodak’s decline played out over decades, accelerating as photography went digital. The evolution ate away at Kodak’s leading position in print photography, even though the company developed a digital camera in 1975.

A 2012 bankruptcy filing and restructuring forced Kodak to sell off a half-billion-dollar portfolio of patents covering digital photography and online photo applications to technology titans including Apple Inc., Alphabet Inc.’s Google, Amazon.com Inc. and Samsung Electronics Co.

Kodak emerged from bankruptcy protection the next year, narrowing its focus on commercial imaging. “Kodak is, in many ways, a startup,” then-Chief Executive Jeffrey Clarke said in 2014 on the company’s first post-bankruptcy earnings call. He said that Kodak should be viewed as having two business lines: a high-growth business that includes digital-printing technology; and a declining business that once was its bread-and-butter, including commercial film.

Yet Kodak has continued to shrink. After posting more than $2.1 billion in revenue in 2014, the company logged revenue of just $1.2 billion last year and has posted losses in four of the last six fiscal years. Today, Kodak has nearly 5,000 employees world-wide, down from 7,300 in 2014. At one time, Kodak employed 145,000.

The last decade has sent Kodak on some unusual detours, viewed by some as attempts to catch on to buzzy concepts in the investing world. They included launches of Kodak cellphones and tablets, and in 2018, a digital currency called KodakCoin, which the company said would help photographers license their work and track when images are used without permission. The news doubled the stock price, a bump similar to those experienced by other companies announcing a move into digital currencies.

The coronavirus outbreak has allowed Kodak to dabble anew in chemistry. In March, Kodak said it would supply isopropyl alcohol to New York state to make hand sanitizer.

Industry veterans say the government loan that would enable Kodak to produce simple chemical compounds makes some sense—the company’s chemical-research lab was once the envy of the world, said Willy Shih, a Harvard Business School professor who ran Kodak’s consumer operations for a period starting in the late 1990s. Yet most of the chemists who mixed compounds and conducted research are gone, he added, due to layoffs over the years.

Mr. Staley said that mixing the chemicals needed to make pharmaceuticals isn’t hard, but making money doing so is, with the advantage going to the producers with the lowest costs. And for now, places like China and India have that advantage.

The Kodak box Brownie camera was a big hit for the company, in an image from around 1935.

Photo: Keystone View Company/Archive Photos/Getty Images

“It’s not frontier chemistry,” Mr. Shih said in an interview. “If you’re such a great chemistry company, do something that’s hard to make some margin.”

Kodak declined to comment on the loan, which is still pending. Part of the rationale behind the loan is to relocate manufacturing of the chemical compounds to the U.S., where the stockpile can be more readily available to produce pharmaceuticals like the ones that could treat coronavirus symptoms.

In announcing the loan, Kodak’s current CEO Jim Continenza said the company’s new venture would “play a critical role in the return of a reliable American pharmaceutical supply chain.”

Write to Paul Ziobro at [email protected]

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