Kodak has finally seen sense and decided not to sell its Stream inkjet business after all. Mind you, Kodak does have form here, having sold the inkjet business once already, to Scitex in 1993 for $70 million, before buying it back later in 2004 for $250 million.
Kodak announced its intention a year ago to sell everything to do with the development of the Stream technology, including the inks, the Prosper press platform, the S-series heads, the R&D teams and sales teams, plus the Dayton Facility and part of the Rochester factory, though not the older Versamark business. This was prompted by an offer from an unnamed company, according to Kodak. Naturally Kodak then looked around to see if anyone else would come up with a better offer, hoping to complete the sale by the end of 2016. Most journalists concluded that anyone who could afford to buy Kodak’s inkjet division investment had likely already invested in an alternative solution.
Philip Cullimore, president of Kodak’s Enterprise Inkjet Systems Division, told me a year ago that the decision was partly down to the development of the next generation of the Stream technology, UltraStream, which was announced more or less at the same as the sale. Cullimore said that Kodak did not have the resources to develop the technology fully, adding: “The opportunity that we see for UltraStream needs a big company to make the most of the technology.”
So, what changed? Cullimore says a combination of three factors caused Kodak to reevaluate its inkjet business. The main factor is a strategic change in how to take the UltraStream technology to market. He explains: “We went to Drupa expecting to see a handful of OEMs to take the technology on but the reaction that we got bowled us over. The reaction to the technology has been significantly stronger than we had anticipated.”
Cullimore says that Kodak had previously been focussed on developing its Prosper presses, but felt that the cost of developing presses complete with transport systems for specific markets would be too much, adding: “That was the thinking when we put it up for sale.”
But following on from the Drupa demonstration Kodak was able to sign letters of intent with several OEMs keen to take the UltraStream technology and develop hybrid solutions, ranging from flexo to web offset and cut sheet machines. This frees Kodak up to concentrate on the inkjet technology while the partners take on the costs of developing the transport systems.
Kodak has given details of 17 of these companies with a few more still to be announced. They include Goss, Matti and Uteco, all companies with a proven track record in developing high volume web fed presses. The plan is to offer a development kit to these partners later this year with actual machines likely to appear in 2018 for early adopters.
The second factor was the investment by Southeastern Asset management of $200 million into Kodak in the form of preferred stocks last November. This has allowed Kodak to restructure its balance sheet by prepaying in full its outstanding second lien term loans. The result is that Kodak has gained some freedom to develop its business for the long term, without the short term pressure to keep creditors happy.
Cullimore says that the third factor was the restructuring of its Prosper division, prompted by the realisation that there was a limited market for a high volume inkjet press and that it would be better to concentrate on hybrid devices. He says: “We decided to focus on certain applications like books and newspapers so we made a significant change to the number of people selling the equipment.”
Cullimore himself has also fallen victim to this restructuring and will leave Kodak at the end of this month. A former managing director of Purup-Eskofot UK, he’s worked for Kodak for 17 years, based in the UK and Europe. Meanwhile, Randy Vandagriff will take over as president of the Enterprise Inkjet Systems Division from 1 May. It’s a sensible appointment given that Vandagriff has 35 years experience with Kodak’s inkjet business, working most recently as vice president of R&D. He also has the advantage of being based in Dayton with the inkjet team.
Cullimore had also headed up the Micro 3D Printing business but this has now been moved into a new division named Advanced Materials and 3D Printing Technology (AM3D), which also includes the operations of the current Intellectual Property Solutions Division. Terry Taber, who is also Kodak’s Chief Technical Officer, will take over this new AM3D division as president. This is an important story in its own right, with Kodak now playing in a number of different industries including additive manufacturing, which may yet prove equally as important to Kodak’s future as its core printing business.
So, where does this all leave Kodak now?
For now, Kodak seems to be in a much stronger position, though its recent financial results will have to be restated to take into account that the Enterprise Inkjet Systems Division is remaining part of the company.
However, there are certainly questions to be asked here. Why did Kodak seriously consider getting out of inkjet just as the rest of the industry is piling into this technology? Why did Kodak not realise the value of selling the UltraStream heads to OEM partners earlier, given that it’s had considerable success selling the S-series head modules in this way for some years now?
More importantly, does Kodak now understand its own identity? The company has been through considerable turmoil in recent years, moving away from its film business and spending a spell in chapter 11 bankruptcy. The inkjet technology is Kodak’s ticket to the next chapter in the printing industry and the mooted sale clearly led to a lot of soul searching within the company as to what it’s role would be otherwise.
I firmly believe that keeping the inkjet technology and developing it further is the best outcome for Kodak. I’ve always felt that the Stream continuous inkjet approach is an extremely elegant basis for a high-speed inkjet system. But for now there’s a limited market for truly high volume digital presses and Kodak was late getting the Prosper presses launched.
Nonetheless, if we look at the number of B1 inkjet presses currently in development – from the Landa S10 to the KBA VariJet 106 – it’s clear that there is a demand for truly high volume digital presses. This demand is driven by the packaging sector, and as Cullimore points out, Kodak’s portfolio is weighted now towards packaging, including its conventional plates and flexo business as well as the Prinergy workflow. So the UltraStream inkjet, with 20-odd OEMs helping to develop it, is in a good position to take advantage of this. Moreover, the decision to continue with the inkjet business shows that Kodak is more confident in its financial position and in its own future.