I was really disappointed when I read the extent of Kodak’s restructuring announcement earlier today. The deal to outsource “certain camera design and development functions” to Flextronics sounds like the end of the Kodak tradition of innovation in the consumer-oriented camera market.
It’s one thing to outsource manufacturing to a company like Flextronics. That’s Flextronics core competency. Lots of companies with strong growth prospects do that. Apple is a great example of this. When they do that, however, the companies keep R&D in house.
Over the past year, Operation Gadget has talked about potentially ground-breaking projects like the Kodak EasyShare One and the Kodak EasyShare V570. The V570 in particular is a camera that’s received favorable reviews. Do you expect Kodak to produce unique cameras like these in the future, if they are paying a contract manufacturer to do R&D for them?
A quick look at Kodak’s web site indicates that it’s in three core businesses: digital cameras, health imaging, and commercial printing. I think Kodak wants to stay in all three markets, but it realizes that it’s not competitive in the consumer digital camera space at the moment. In order to continue to grow the business, they are right-sizing the consumer digital camera business and pouring additional resources into their other, more profitable businesses for the time being.
This may make Wall Street happy, but I think it will constrain the company’s growth potential in the future.