Kodak On the Move

In recent months Kodak has announced acquisitions and restructured in a bid to grab a bigger chunk of the graphic arts business. But how will this benefit in-plants?

By Bob Neubauer

Eastman Kodak is optimistic. The 124-year-old company is betting that in-plants and printing companies are looking for a single vendor to satisfy all of their graphic arts needs—and it has been investing rather heavily lately to make sure it becomes this vendor.

Since 2002, the Rochester, N.Y.-based firm has been acquiring companies and buying out joint venture partners as part of a strategy to dominate the graphic arts business.

But is this strategy good for in-plants?

Barbara Pellow thinks so.

"I think I'd bet on somebody that had made that level of investment in the industry and demonstrated that level of commitment," says Pellow, chief marketing officer and vice president of Kodak's Graphic Communications Group.

In-plants, she says, are the perfect candidates for Kodak's one-stop shopping strategy: They are working with both digital and analog technologies. They are looking at products ranging from digital printers to platesetters and direct imaging presses. Kodak's acquisitions—and those soon to be finalized—have brought it into all of these businesses.

"Every customer that we deal with is going to be working in a hybrid environment," she says. Kodak is positioning itself to help in-plants manage all the elements in that environment, she adds.

Gathering its Forces

Part of that strategy has involved acquiring some big-name companies. These include:

• Encad: acquired in 2002.

• Scitex Digital Printing: acquired in 2003 and rechristened Kodak Versamark. (Kodak had sold this business to Scitex in 1993.)

• Heidelberg Digital LLC: acquired in 2004, along with Heidelberg's 50 percent share in their NexPress Solutions partnership.

• And most recently, in January, Kodak announced plans to acquire Sun Chemical's 50 percent share in Kodak Polychrome Graphics (KPG) and also to purchase Creo.

"I can't think of anybody who's made this level of investment in the marketplace to deliver a full set of solutions and services," Pellow says.

The KPG acquisition, in addition to broadening Kodak's product portfolio with expertise in computer-to-plate systems, proofing, film and plates, will expand Kodak's global distribution network with its strong sales organization. The deal was expected to close early this month.

For its part, Creo will bring workflow software and CTP expertise to the mix, as well as color servers, on-press imaging technology, systems for digital photography, scanning and proofing, and printing plates and proofing media—not to mention 25,000 customers worldwide.

Despite the teaming up of so many experts under the Kodak banner, some in-plants are skeptical.

"They've got so many irons in the fire," observes Joe Tucker, administrator of the Department of Administrative Services at Ohio's Office of State Printing. "Can they follow all those different...products and stay profitable in all of them? I see printing companies going down every day because they try to be everything to everybody."

Kodak, however, has seen the demand for a single-source solution.

"Our customers are already confirming the value of being able to turn to one company for everything they need across their graphics workflow, from simplifying choices and making sure it all works together, to streamlining service," says Pellow. "One company can make it all work together."

The secret, Pellow says, is to have specialists dedicated to each product, but a single account manager interfacing with the customer. That manager, she says, will do whatever it takes to meet customer needs.

"This is consistent with the way that the majority of high-tech digital firms serve customers," she says. "No single individual can be an expert on [all] technologies. The account manager will clearly be knowledgeable about the Kodak graphics communications business, but there are times when strong implementation expertise will be required. The account manager will have specialists to support him to meet customer needs."

The Sale of Office Imaging

Still there are lingering doubts among in-plants, many of whom were Kodak customers in the '90s and then watched as the company sold its Office Imaging business to Danka and left them behind. Some of those in-plants feel that Kodak departed the graphic arts business back then, only to turn around now and try to reclaim it.

Pellow views it differently. Kodak was not retreating from the graphic arts when it sold its toner business in 1997; rather, she says, that business was not really part of the production graphic communications market.

"When you look at the Office Imaging market, that was really a copier space," she says. "We felt that the office side of the market wasn't consistent with where Kodak was headed. Kodak never ever really left the production side of it in terms of the art and science of color management."

She points to the the joint ventures with KPG and Heidelberg, adding, "Our focus has been on the true graphic arts, graphic communications side...vs. the traditional office environment."

As for why Kodak left the copier business, Mark Weber, director of business development for Kodak's Graphic Communications Group, points out that, back in the late '90s, most of the 150,000 Kodak copiers in the market were analog machines.

"The demand for digital copiers was growing in all segments," he says. "Kodak only had a high-end digital solution, the eventual Kodak Digimaster product. The remaining base was vulnerable for replacement. Selling off the division at that time proved to be a wise move."

One user of Kodak copiers back then was Indiana University Printing Services. Director Joe Goss retains positive feelings about Kodak from that period.

"We always received very good service and good machinery from Kodak," he says.

In recent years his in-plant has bought all of its prepress materials from KPG and is in the process of getting an eight-up platesetter from the company.

"They've been absolutely outstanding," he lauds. "I would rate them as A-plus." This good experience has left Goss feeling upbeat about Kodak's expansion strategy.

"I'm pretty positive about it myself," he says.

Kodak's competitors have tried to stay positive, as well. Xerox feels Kodak's efforts will help strengthen the digital market as a whole.

"The growing presence of our competitors in the graphic communications space will create an increased dialogue about digital technology and its leaders, including Xerox," notes Quincy Allen, president of Xerox's Production Systems Group. "Given Xerox's technological advances and experience, the more companies that support and promote digital printing, the greater the awareness of Xerox and its offerings."

The Building of a Giant

Kodak's push to strengthen its graphic arts presence has its roots in the decline of the photo film business on which it built its reputation.

Founded in 1881 as the Eastman Dry Plate Co. by George Eastman—the inventor of roll film—along with businessman Henry Strong, the company brought photography to the masses. It grew steadily, weathering the suicide of Eastman in 1932 and going on to become a multinational giant in the imaging business. Today, with sales of $13.5 billion (in 2004), the company has four main businesses:

• Digital and Film Imaging Systems, providing consumers, professionals and cinematographers with digital and traditional imaging products.

• Display and Components, providing organic light-emitting diode displays and imaging sensors to equipment manufacturers.

• Health, which supplies image capture and output products to the healthcare industry.

• The Graphic Communications Group (see sidebar).

A few years ago, as digital cameras began displacing its traditional film business, Kodak took a hard look at its strengths and began fashioning a plan for its future growth. With more than 1,000 patents in ink-jet, and a strong belief in the growth of this technology, Kodak felt this was a logical direction to move. The acquisition of Scitex Digital Printing followed.

"In the next 48 to 60 months, I think you will see major advances in the world of ink-jet," hints Pellow, who adds that company president and chief operating officer Antonio M. Perez believes the market for speed and quality will ultimately move in this direction.

"We're going to continue to invest in electrophotography," Weber hastens to add. "The cut-sheet marketplace is still attractive for both commercial printer and corporate users."

The company demonstrated its commitment to this area when it acquired Heidelberg Digital and NexPress last year.

Kodak knew that equipment alone wasn't enough, though; it needed a strong global service network. So it integrated its Document Products and Services (DPS) operations into the Graphic Communications Group. DPS is a leading provider of document scanners as well as maintenance services for document scanning, archiving and multi-vendor equipment. The service organization, combined with GCG's existing service organizations from NexPress, Kodak Versamark and Encad, will number more than 1,500 people when integrated.

The last piece of the puzzle, Pellow says, was building Kodak's distribution capabilities, which it will accomplish with the KPG acquisition. Creo will only sweeten the pot with its digital workflow expertise, she adds.

"What we looked at was offering the customer the workflow capabilities to integrate and build best-of-breed hybrid production environments," Pellow says. "Hence the acquisition of Creo."

In-plants, she reiterated, are perfect examples of the type of hybrid production environments Kodak wants to serve. After all, she points out, an in-plant's success does not hinge on just one technology.

"It's how you use those technologies in combination to make your in-plant the most efficient it could possibly be," she says.