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Kodak Reshuffles Decks, But Should Take Notes From Fuji's Playbook

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Kodak announced a new business structure this morning, while rival Fuji captures hearts and minds at CES.

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Shares of fallen American icon Eastman Kodak (EK) jumped this morning by a whopping 57% to $0.63 after the company announced a rejiggering of its reporting structure.

The news is at least temporarily helping to fight back investors' fears of a bankruptcy following last week's Wall Street Journal reports regarding a possible filing. (See: Is There a Run On Kodak Film?)

However, a look at CES indicates that Kodak would do well to emulate the new strategy employed by key rival Fujifilm (FUJIY.PK).

So back to the news.

Kodak is reducing its number of business segments from three to two, an effort it believes will "increase productivity, reduce cost and accelerate its transformation into a digital company that delivers sustainable profitability and creates value for its stakeholders."

The key word here is digital. Perception is reality, and Kodak very rightly wants to be seen as a forward-thinking tech company rather than a relic of the past.

Under the new structure, which is effective as of January 1, 2012, Kodak's three business segments will be consolidated into two:

1. Commercial: will include Kodak's Graphics Communications Group (CPG), and two product lines from the Film, Photofinishing and Entertainment Group (FPEG) -- entertainment imaging and commercial film.

2. Consumer: includes the Consumer Digital Imaging Group (CDG), plus three lines from FPEG, those being paper & output systems, event imaging solutions, and consumer film and intellectual property.

Kodak will begin reporting its financial results under this structure beginning with the current quarter, and will include appropriate apples-to-apples numbers for year-over-year comparisons.

However, while streamlining the reporting and management structure could help Kodak drive out some costs and simplifies operations, Kodak has already been cutting expenses and dumping business units and products to save cash. And even with those efforts, it is still burning money in its CPG and CDG units, while FPEG has only been marginally profitable.

At the end of the day, if Kodak is to avoid what seems like an inevitable slide to bankruptcy, it has to work on generating revenues as well -- and that means getting consumers excited about its products.

Ironically, the one company Kodak should be looking to for inspiration is the very one that catalyzed its downfall beginning in the 1980s -- its aforementioned Japanese rival Fujifilm.

Fuji is rapidly carving out a unique niche within the digital-camera market -- one combining high-end electronics and camera optics with vintage-looking camera designs, at price points within the range of typical hobbyists.

Last year, Fuji had a major hit with its $1,200 classically-styled X100 camera, and followed that up with a less-expensive version named the X10.

The Fujifilm X100:



Click to enlarge

With the X100, Fuji created a new identity that clearly set the company apart from the likes of Canon (CAJ), Nikon, and Sony (SNE), and that meant competing on emotions rather than price. The consumer response to the fresh and distinct X100 was so enormous that some shoppers waited months for orders to get filled.

And turning to this week's CES conference, Fuji is already garnering enormous amounts of positive press and consumer attention for its new X-Pro1, another vintagey camera -- this time featuring interchangeable lenses -- that already has people clamoring to commit to a Fuji system. Commitment to a system means additional sales in the coming years, just like we see with the other major camera manufacturers.

The Fujifilm X-Pro1:

Click to enlarge

I am fully aware that I'm a member of a media that's too often eager to hand out advice to the world's biggest companies, but I don't think rocket science is required here -- Kodak has to get people excited by standing out from the crowd. It has all the technical know-how in the world, and oodles of valuable brand names and trademarks.

It just has to take the next step, and make something... really cool.

Too bad that's just not so easy.

Twitter: @MichaelComeau

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Position in FUJIY.PK
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