CAIRO: In a move to improve slumping profits, photography giant Kodak is handing over a major chunk of its Egyptian operations to a new, domestically-based group, company officials announced this week.
Vision International S.A.E., created from the ashes of Kodak’s former management team in Egypt, will handle the distribution, sales and servicing of the photo icon’s domestic arm.
That includes everything from photofinishing and digital printing to the sale of cameras, film and batteries.
“Egypt is a key country and a very strategic country, says Komal Sharma, Kodak’s general manager for the Middle East and Africa.
“This exit gives us a huge opportunity, he says.
Sharma also tried to reassure his customers that the transition will be a smooth one.
“We will maintain the same face to our customers that we have always had, he explains, noting that many of the company’s key managers and employees have joined Vision.
The announcement was made at an opulent launch party at the Citadel Restaurant in Al-Azhar Park on Sunday night.
The decision to pull out of local distribution, sales and servicing reflects not only the changing tastes of Egyptian consumers, but also Kodak’s struggle to keep up.
“They’re making less profit margins because of digital, says Ali Abdul Ghaffar, Vision’s new managing director, in an interview with The Daily Star Egypt.
He adds that by getting out of the service and distribution game, Kodak will streamline its operations, pump up its profit margins and trim about a quarter of its operating costs.
The company made a similar, downsizing move last month when it transferred the manufacturing and global distribution of its digital cameras, along with 550 employees, to Flextronics International, Ltd.
The creation of Vision International also means the “demise of the film companies Agfa and Konika in Egypt, says Sharma, although he was quick to say that most former employees are now working with Vision.
“They didn’t looe their jobs – the customers of Agfa and Konica are now working with Kodak through Vision.
The restructuring here in Egypt is typical of Kodak’s worldwide strategy to shift away from the shrinking analog film market, its traditional domain, to the growing digital market.
Walid Zakaria, general manager of the Kodak Spot store in Giza, says that while Egyptians have been slower than the rest of the world to catch on to digital, times are starting to change.
“It’s been slow in Egypt, but in other countries, there are almost no analogue cameras anymore – especially with professionals, he says.
Zakaria estimated that the split between analog and digital camera sales at his shop is still about “fifty-fifty.
But, he noted, as computers become increasingly common in Egyptian homes, digital sales will take over.
“I don’t think there will be many families without computers – and I think digital cameras will be similar, he says.
Kodak, who virtually created the consumer photography market at the turn of the last century, has struggled to keep apace with its digital competitors like Sony and LG.
While the company had worldwide sales of $14.3 billion last year, it expects total revenue to decline by about three percent this year. Last month, it reported a second quarter loss last month of $282 million, or about $0.98 per share.
The company blamed the losses on restructuring and the rising price of silver, which is used in the production of camera film.
“Our second quarter results demonstrate continuing progress in the execution of our digital business strategy and the implementation of our digital business model, said Antonio M. Perez, the company’s CEO, in a release last month.
Perez added that expanding the company’s digital margins is a top priority.
While the traditional film market is drying up, the good news for Kodak is that digital revenues are up.
The company posted digital revenue of more than $1.8 billion in the second quarter – a six percent increase over last year’s numbers.
