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Retailers Shocked But Not Surprised At Phogenix Demise

Retailers Shocked But Not Surprised At Phogenix Demise

by Dan Havlik

Retailers reacted with shock and disappointment to the sudden news last month that Hewlett Packard and Kodak had decided to pull the plug on the companies' much-anticipated Phogenix inkjet minilab joint venture.

"I was really saddened when I heard the news. It's a tremendous piece of equipment," Bill Price, owner of Bob Davis Camera in La Jolla, California told PTN.

Price's store was one of several in the country that had been beta testing the low-cost Phogenix DFX inkjet minilab. Price was such an advocate of the DFX, his image even appeared in some of Phogenix's advertising. "I was the poster boy for this," he said. "I had already placed an order. I was slated to have the first one."

Unfortunately for Price, it was not to be. In a stunning announcement in May, HP and Kodak said they were dissolving the San Diego-based Phogenix after three years of working together to develop the digital inkjet minilab for use at retail. The company had about 100 employees.

"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," said Matthias Freund, chairman of the Phogenix Board of Directors and chief operating officer of Kodak's Consumer Imaging Products and Services business, and Mary Peery, member of the Phogenix Board of Directors and senior vice president of HP's Digital Imaging & Publishing business, in a somewhat bizarre joint statement released on May 14th.

The announcement caught photo retailers, and even apparently many Phogenix employees, off guard.

Joel Paymer of Camera Land in New York City, whose store also had been beta testing a DFX, said his Phogenix sales rep was as stunned as he was when the news broke. "He had just told me he had sold a bunch of these in the city. We had ordered one and were trying to figure out if we wanted a three-year or a four-year lease. It came as a total shock."

Some retailers, though, said privately that they weren't entirely surprised that the rocky marriage between HP and Kodak had ended up in divorce. Under the arrangement, HP would be able to sell the Phogenix DFX to large consumer electronics chain stores such as Best Buy or Circuit City, and Kodak could sell to photo retail stores. Because the small footprint of the DFX and its relatively inexpensive price tag (approximately $40,000 per unit) made it more appealing to smaller retailers, many felt Kodak had gotten the better end of the stick.

"Unfortunately, this is not unexpected," one retailer told PTN, suggesting that the size and egos of Kodak and HP may have contributed to the project's downfall.

Many, however, still wondered why the companies decided to call it quits so soon after finally bringing a product to market. During PMA last March, Phogenix announced its first big sale of the DFX-40 machines to the Karstadt department store in Germany.

Though the Phogenix venture is only three years old, the two companies had hoped to start making sales by as early as 2001. Delays on the project began to irritate some interested buyers.

"I was ready to buy it at PMA last year. I was ready to order it then and there," said Steven Sedlik of Tilben Photo & Electronics on Long Island, New York. Though his name was put on a list, Sedlik soon grew frustrated as the months after PMA 2002 went by and no formal orders were being taken. In the end, he decided to go with a Fuji Frontier digital minilab, at more than twice the cost, instead.

In contrast to other photo retailers interviewed by PTN, Sedlik was not impressed with the DFX after he saw prints made from it at PMA 2003.

"I'm glad I didn't buy it," he said. "I felt it wasn't up to snuff. It didn't have the quality of the chemical minilabs and it was too damn slow."

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