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Kodak Says 'No' To Inkjet Lab; 'Yes' To Dry Film Processing



The week of May 11, 2003 will be remembered for more than the Mothers' Day holiday. It was the week that Kodak decided that there was a future in dry film processing but that a minilab with inkjet printing capability had none.

It was a week in which the hopes, dreams and sweat of one dedicated group were dashed at the last possible moment; while the hopes, dreams and sweat of another dedicated group were rescued at a time when the future was in doubt.

This was the week that Kodak was forced by its partner, Hewlett Packard, into un-jointing the Phogenix joint venture, created three years ago, at a point when field trials were completed and the first 15 production units were literally within days of being shipped to customers. The announcement came only two days after Kodak revealed it had purchased Applied Science Fiction, a firm with a cloudy financial future, acquiring its dry film processing technology which it planned to incorporate into its ubiquitous Picture Maker. (A story focused on the Kodak acquisition of ASF appeared in the June issue of PTN.)

Curiously enough, these two products, the Phogenix inkjet minilab and the ASF dry process, were historically linked from Day One. It was during the PMA 2000 convention that suits from HP and EK proudly announced at a full blown press conference the formation of the joint venture-the name Phogenix was not to be selected for months. (The stock of both firms jumped over $2 a share that day.) At the same convention ASF folks were quietly touting their dramatic process of chemical-free developing.

Unrelated? No. At the Venetian Hotel, far away from the convention floor, the Kodak-HP people had invited a chosen few to see a mock-up of what was expected to someday become an inkjet minilab. Part of that mock-up was a black box attachment that was supposed to represent the ASF dry process system. In other words, the complete system would offer the developing and printing of film without any chemicals whatsoever. It caused quite a stir at the time, not all of it positive.

In the end, Phogenix decided to pass on the ASF device and instead designed its own wet developing system for film as a companion to its inkjet output lab. Only the printing would be chemical-free. ASF went its own way and while they did develop a credible dry processor, called the Digital PIC, they were not able to find an OEM customer for it and finally decided to market its own kiosk. (Had Phogenix originally adopted Digital PIC, it would have been interesting to see what scenario would have played out in the joint venture.)

Now, three years after the high-profile introduction of Phogenix and the low-key beginning of Digital PIC, only Digital PIC survives. Kodak was intertwined with both. A lot of people would have bet it would go the other way.

Despite the fact that the latest Phogenix and ASF announcements came within just a few days of each other, (as did the announcements of their origin in 2000), there is little doubt that the timing was anything but coincidence. The ASF acquisition was in development since photokina as Kodak saw in the dry film processor an opportunity to set the Picture Maker apart from the rest of the kiosk bunch. The Phogenix bombshell came out of nowhere following an HP statement that must have sent the Kodak suits into a Red Alert.

The first inkling that something was amiss in the HP-Kodak marriage came in a one-paragraph statement made by HP a week earlier in response to inquiries it received. It read, in part: "...HP will cease further investment in the retail and central lab photofinishing spaces. This decision is about investment trade-offs."

(The reference to central lab finishing concerned the HP purchase of Indigo printing last year. I understand HP will continue to pursue the commercial printing market with Indigo but will not proceed with a planned program to introduce the process into a central photo lab printing environment.)

By Monday, May 12, Kodak and Phogenix folks were huddled in Rochester to see if a solution could be found to the situation. It was finally determined that without HP there was no way for Phogenix to continue.

There is not a single reference to Kodak in the original HP statement which suggests to me that HP had made the decision to quit the joint venture unilaterally. Without HP and its support with funds and "intellectual properties" there was no way for Kodak to go it alone.

The formal announcement of the dissolution came late Wednesday afternoon, May 14, and was the big buzz at the monthly meeting that night of the PhotoImaging Manufacturers and Distributors Association (PMDA) in New York which attracts some high level folks. The official joint statement read:

"Both HP and Kodak believe the technology being developed by Phogenix continues to offer a viable solution for on-site digital photo processing. However, based on the anticipated return on invested capital for the parent companies, each company has separately decided to focus its own investments on other opportunities."

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