Polaroid went bankrupt in late 2001.

The shift to digital imaging had removed
the company’s profitable sales of film.

More about how and why this happened
can be found here.

Let’s take a look at how the stock market
commented on Polaroid’s development throughout
the 1990s when there was still a chance of survival.

Mary Benner at
Wharton has
done some great
research
regarding how
securities
analysts looked
at Kodak and
Polaroid during
this period.

The results are very interesting and will be
summarized briefly on the coming slides.

Benner shows that analysts basically ignored
digital initiatives but praised all products that
generated revenues from film.

In total, Polaroid launched 20 digital cameras. They
were only mentioned 13 times in the 1990s.

Polaroid’s first digital camera, the PDC-2000 should
have caused quite some attention, but was only
mentioned four times by analysts.

The PDC-3000 was never mentioned at all even
though it won an industry award from the Photo
Marketing Association for the “best image/print
quality, production level, features and price” .

This view stands in sharp contrast to what the
analysts thought about Polaroid’s new film cameras.

The I-Zone…

… The Joycam…

… and the Popshots…

… are in total mentioned 610 times!

These products have in common that they are
incremental improvements of the existing film
technology and do not in any way address the
threat from digital imaging.

Analysts were even optimistic about Polaroid…

“Polaroid plans to introduce 50 new products...
Some of the more intriguing ideas that have
captured our attention are a one time use instant
camera [and] differentiated film products...”
//Morgan Stanley, March 1997

“Based on the current trajectory of these new
product launches, it’s becoming clear that
Polaroid is poised to deliver solid revenue growth
over the next several years…”
// Prudential, July 1999

“We are upgrading Polaroid to Outperform from
Neutral based on the company’s new product
performance…”
// Morgan Stanley, January 2000, less than two years
before the company goes bankrupt!

Analysts even stated that Polaroid was
less vulnerable to the digital threat than
firms like Kodak…

“Digital Is Nothing but Net for Polaroid… we
continue to believe that instant is less susceptible to
digital inroads, as the demographic profile of the
typical instant camera user is significantly biased
toward low-income users.”
// CSFB, February 1998

“We believe that investors are inappropriately
grouping Polaroid’s position relative to digital
imaging along with that of Eastman Kodak. In our
opinion, Polaroid’s consumer instant business is
less vulnerable to digital imaging… consumer
applications of digital photography will likely have a
smaller impact on the instant photography market
than on the conventional photography market.”
// CSFB, December 1997

“We view the introduction of the C-211 Zoom as
encouraging in that it exemplifies Polaroid’s
adaptation to the convergence of traditional (silver
halide) and digital imaging…Moreover, with several
more new products slated for introduction over the
next 12 months, the ability to sustain top line growth
going forward is enhanced…”
//SalomonSmithBarney, July 25, 2000

Pretty interesting idea that instant photography
would not be vulnerable in the same way because it
was an amateur segment.

I remember when my friends and I bought our first
digital cameras in the early 2000a and took photos
of everything, simply because it was fun.

A typical Polaroid behaviour of using cameras…

… Instant photography must have been much more
vulnerable and given the fate of Polaroid this must
have been true to some extent.

It even seems that the financial analysts were more
critical towards Kodak than Polaroid, even though
Kodak was much more committed to digital imaging.

Ironically, the reason for this might very well be that
Kodak cared more about digital imaging.

If you care more about it, you’ll talk more about it
and this will sooner or later be absorbed by financial
analysts, who seem to be very reactive in their way
of looking at companies.

Once the jaws of digital imaging were opened,
things turned nasty for Polaroid.

The bankruptcy was a disaster for employees,
retirees and shareholders.
In the months before this, Polaroid paid in
total 6,3 million USD to senior executives…

… Polaroid shares were
traded at $60 in 1997.
In 2001, they were frozen
on the New York Stock
Exchange at 28 cents.
The stock lost 99,5 percent
of its value!

You would have been right by doing the complete
opposite of what the analysts suggested.

In the end, it was obvious that Polaroid’s
weak response to digital imaging was the
main reason why the company went bankrupt
in October 2000.

But this was not mentioned at all by the
financial analysts before it happened.

And they were the last ones to encourage or
understand the importance of entering this
technology in the 1990s.

Image attributions

Sources:
Benner, M.J. (2007). Securities analysts
and incumbent response to radical
technological change: The case of digital
technology in photography.
Tripsad, M. and Gavetti, G. (2000).
Cognition, Capabilities and Inerta –
Evidence from digital imaging.

Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom@chalmers.se