Did Kodak Say It Was Going to Divest NexPress? No!

Jim Hamilton
Feb 5, 2009

The Wall Street Journal reported today that Kodak was planning to “seek partners to share the costs or possibly sell” the Kodak Gallery and NexPress businesses. In a conversation that I had with Kodak this morning, it became clear that the Wall Street Journal had misinterpreted Kodak’s statements and jumped to an incorrect conclusion about divestment. During the investor conference Kodak did say that it needed to transform and position its Kodak Gallery and NexPress businesses (it made the same point about image sensors and OLED businesses). Kodak, however, says that no mention was made of divestment. For NexPress, Kodak said that it intends to explore partnerships and alliances, as well as look at segmentation and licensing opportunities.

I spoke with Kodak under non-disclosure recently about its go-to-market strategy in the United States and Canada for the Graphic Communications Group (GCG). In light of the misinformation coming out of media portrayal of the investor conference, Kodak has released InfoTrends from its non-disclosure agreement so that I can address the matter. The go-to-market strategy that Kodak shared with InfoTrends made no mention of divestiture, and in fact presented a very different picture of GCG.

For those of you who have looked at Kodak’s recent financial results announcement, you know how bad the fourth quarter was for Kodak. Kodak positioned it as a story of two halves. In the first half of the year digital grew 10%, traditional revenues were in line with their forecast, they had come off of a strong showing at drupa, and they had a solid cash position. The second half was another story. Problems in global retail markets hurt Kodak consumer electronics but, more importantly for GCG, Kodak saw a rapid decline in global print demand, which translated into weak demand for equipment and consumables. Kodak’s digital revenue, whose year-over-year growth had been strong in the first two quarters, barely increased compared to the third quarter of 2007 and dropped significantly compared to the fourth. Even prior to the financial announcements Kodak had acknowledged that action was inevitable.

This brings me back to Kodak’s go-to-market strategy for GCG. There will now be four strategic product groups in the new GCG: Prepress Solutions, Business Solutions & Services, Digital Printing, and Document Imaging. What you will note first about this arrangement is that the toner-based and inkjet-based digital printing groups (NexPress, Digimaster, and Versamark) are all under common management. From this move alone it is clear that rather than being set up to divest, this structure more tightly integrates the various digital print organizations into Kodak GCG. More will become clear over time about the structure and channel plans of GCG. InfoTrends will write about that as additional information becomes available.

There will surely be continued speculation about Kodak and GCG. Will the Ricoh relationship strengthen? What will become of Canon’s relationship with Kodak in light of Ricoh’s acquisition of IKON and Canon’s introduction of monochrome imagePRESS products that seem likely to compete with Digimaster? All of this will play out over time. For now, however, there is no sign coming from Kodak that a NexPress divesture is imminent. In fact, the toner-based side of the digital business has some of the most attractive upcoming possibilities in 2009, including the new dimensional toner capability for NexPress and the increased speed/productivity of the Digimaster EX300. So while speculating about a NexPress divestiture is intriguing, it’s not what Kodak is planning.

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