Why pay more for a printer? Because it will cost you less.

NEW YORK (Fortune) -- It was perhaps fitting that Kodak launched its foray into the inkjet printer market at the NBC studio where Saturday Night Live is broadcast. Like the graying comedy show, Kodak (Charts) has been showing its age of late, and it paid a huge price for not recognizing how quickly the market for traditional film would evaporate.

Now in the final year of a massive corporate overhaul that has cost billions of dollars and thousands of jobs, Kodak's CEO Antonio Perez has decided to turn the $45 billion inkjet-printer market on its head. Printers usually come cheap alongside PCs, with the real profits coming from ink cartridges, but Perez is betting that consumers will pay more ($150 to $300) for his new Easyshare printers by halving the cost of ink. Perez discussed the plan with Fortune's Matthew Boyle.

Kodak CEO Antonio Perez

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What was the toughest part of this launch?

The hardest thing was to make the decision to focus on this market. We were very late - 20 years late!

How did this come about?

I came to Kodak in April of 2003. That month, a Kodak scientist showed me the nanoparticle pigment ink technology that was, for me, the Holy Grail of thermal inkjet printers. All the inkjet companies today use dye-based inks. But Kodak knew about nanoparticles from its work on film coating, and had invested in the technology for years to make this smooth dispersion that they get in the coatings for their film. All that know-how was beautifully applicable to the inkjet market, but it was just sitting there in the labs, because the company was focused on film.

I said let's put all these things together. In June 2003, I hired Bill Lloyd and Philip Faraci, whom I knew very well from my days at Hewlett-Packard (Charts). I said to them, 'is there something here that I don't see?' They came back to me with a report on the [printer] market, and we had a meeting in late June. After the meeting I went home, and didn't sleep all night. The next day we met again and I said, "We're going to launch this."

Then the question was, how will we get the people? We had the technologists in Rochester, but we didn't have a printer team. Luckily, we had an [inkjet printer] joint venture with HP called Phogenix, and HP didn't want to continue it. All of a sudden there were all these people out of jobs. That was the jumpstart.

What was the biggest hurdle?

One big issue was with the pigment inks. With a laser printer, you print on the paper. When you print with inkjets, you print into the paper. It's a very important difference. Because inkjet prints into the paper, the ink presses through the fibers of the paper. The inks can stay too long and get too deep in the paper and you will not get vibrant colors. So we had to redesign a very complicated process that spread the ink across incredibly thin. We were scared for a few months there. You don't want to have to deal with inventions in the middle of a program like that.

Why slash the price of ink?

For the last 15 years, not one week passed that a customer - even friends and family - didn't complain about [the price of] ink. I have had this monkey on my back for 15 years. So what can you do? Obviously this is not a charity operation, so you cannot give it away. You have to find a way that costs you less.

Here's an example: When you make an inkjet printer head, it is a highly complicated device. It's made in a clean room with 50 or 60 robots that do the work. Those robots, at most companies, are custom-made and very expensive. Funny enough, being late to the market, we had the opportunity to take advantage of incredible improvements in robotics - we were able to use standard robotic equipment to make the inkjet heads and that saved a hell of a lot of money.

We looked at every part of the value chain and said, we can't do it the way the industry is [currently] doing it. Then it would be just one more product.

Will the restructuring pain end this year?

Yes.

How tough has it been?

If I were to start it all over again, I think I could have gained maybe a year, knowing that the market for traditional film would go down that fast. I also would have taken more risk. But at the same time, we did not have one work problem in all of this. We just closed a factory with 3,000 employees in the middle of France and we didn't have one issue. So, I'm happy to get to the end of this.

What would [Kodak founder] George Eastman say if he were here?

He sees me every day. We have all these paintings of him in Rochester and his eyes just follow you everywhere. He's happy with me, I think. He might give me a bonus one of these days.

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Kodak Inkjets target the heart of HP's profit