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Field for Polaroid narrows
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October 30, 2001: 6:11 p.m. ET
Olympus, Fuji considered among front-runners to acquire bankrupt company.
By Staff Writer John Chartier
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NEW YORK (CNNmoney) - Several major players in digital printing are interested in acquiring all or part of bankrupt Polaroid Corp., and a few key names keep turning up in discussions about the company.
Olympus Worldwide, Fuji Photo Film Co. Ltd., and Eastman Kodak (EK: Research, Estimates) are consistently mentioned as companies likely to snap up Polaroid (PRD: Research, Estimates) and its new digital printing technologies, dubbed Opal and Onyx, sources familiar with the situation told CNNmoney.com.
Of those, Japan's Olympus is emerging as the front-runner. Olympus is the only one in the field with a significant portfolio of strong digital cameras, but not much in the way of digital printing technology, which is where analysts expect companies to turn the biggest profits as digital technology continues to evolve.
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The Olympus C-211 is a digital camera that prints photos with Polaroid film. (Source: Olympus) | |
"Olympus has no printing capability. Opal and Onyx would give them the printing capability," said Ulysses Yannas, an analyst with Buckman Buckman & Reid.
Olympus does have one digital printer, the Camedia, but analysts have said it's not a brand that leaps into consumers' minds.
Additionally, Olympus and Polaroid have an existing relationship, which was strengthened last year when the two partnered on the C2-11, a digital camera that uses instant film. Polaroid's I-zone camera, the best-selling camera in the United States, also uses digital technology to print instant pictures on stickers.
A U.S.-based Olympus spokesman could not be reached for comment Tuesday. Polaroid has repeatedly acknowledged that it is speaking with the entire gamut of possible investors, but has so far not publicly revealed which ones are on its "short list."
On Monday, Polaroid CEO Gary DiCamillo notified employees through an internal memo that three top executives had resigned this month following the company's Oct. 12 voluntary bankruptcy filing.
Polaroid has been struggling to pay down nearly $1 billion in debt amassed fending off takeover attempts dating back to the 1980s. Once a powerhouse of research and an industry bulwark with its instant film business, Polaroid fell behind as the industry began the switch to digital photography.
In August, Polaroid decided to withhold interest payments to its bondholders, triggering an angry reaction and negotiations that led to an extension of some of the company's loans by its banks. Lengthy negotiations with bondholders resulted in the company's Oct. 12 bankruptcy filing.
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Polaroid's i-zone is the nation's best-selling camera. (Source: Polaroid) | |
Throughout this entire process, Polaroid has sold off non-core assets and real estate and is in the process of selling off its Photo ID business and could also be selling its polarized sunglass lens business, analysts have said.
The company has also discussed selling the company with Eastman Kodak executives, but that company's own struggles with declining film sales in the wake of the slowing economy and Sept. 11 terrorist attacks, could make this a less than ideal time for a deal, one analyst who asked not to be identified said.
Canon has already said it is not interested in the company and analysts have speculated that Hewlett-Packard, with its strong-selling inexpensive printers, could be interested, but likely will not make a move because of its own financial woes in the PC market.
One industry source believes the real contest is between two Japanese companies, Olympus and Fuji.
"Fuji apparently is manufacturing a fair amount of Polaroid film for them in Asia," the source said. "If that's the case then the manufacturing processes are already up and running outside of the USA."
Fuji also produces its own instant film, which would fit well with Polaroid.
However, Olympus makes sense in that the bulk of its efforts have been in developing quality digital and 35 millimeter cameras. Its latest entry, the E-20, retails for about $2,000, but it also offers a range of more inexpensive digital cameras.
What Olympus doesn't have is a strong printing technology.
"I don't think Olympus has anything in the way of serious printers. It's not the first name that jumps into the front of your head," the source said. Printing is the flip side of the coin for digital cameras."
What Polaroid does have is printing technology.
The company's efforts at catching up in the digital field resulted in Opal and Onyx, their digital printing technologies for which they have been shopping for a partner.
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In my opinion, Polaroid has a very strong brand, and that brand can be leveraged across the technology transition from film to digital.
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Lisa Walker
Co-executive director
International Imaging Industry Association |
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Aside from the Polaroid brand and its deep-rooted retail shelf space, these technologies are what makes the company a tempting acquisition for some.
Opal is consumer-oriented and provides a way for people to bring their digital cameras to a kiosk in a mall, drugstore, or other retail store where they can quickly and inexpensively print their photos or e-mail them to family and friends.
Onyx is more for business applications such as for law enforcement, coupons and brochures, said Chris Chute, a digital imaging analyst at technology research firm IDC Group.
"That technology in particular would be appealing to a variety of potential companies from a Fuji or Kodak, who would want to buy that for their kiosks, to a Sony or a Cannon who kind of want to do the same thing," Chute said.
Whoever makes an offer for Polaroid is likely to be one that recognizes the strong value of the company's brand and instant film technology, said Lisa Walker, co-executive director and chief marketing officer of the International Imaging Industry Association, an industry trade group.
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"In my opinion, Polaroid has a very strong brand, and that brand can be leveraged across the technology transition from film to digital," Walker said. "The entire industry is struggling with the transition from film to digital. Those companies that recognize the key is to focus on the consumer rather than on the technology or the media will be successful."
And the value of instant photography, where Polaroid has been the dominant player for decades, is that it is easily applicable to the digital market. They have the same customers, Walker said.
But exactly who ends up with the historic Polaroid brand remains uncertain as consumers scale down big-ticket purchases and snap fewer pictures in the post-Sept. 11 economy.
Nevertheless, watchers say a deal is likely to be announced before the end of the year. 
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