Polaroid focuses on lines to provide a product mix
For years, Polaroid Corporation's television commercials have featured shiny instant cameras and a witty war of words between a handsome couple. But now Polaroid has decided it's time to offer consumers more than instant pictures. So its latest ad stars a single, grim-faced pitchman hawking a highway trouble light.
Polaroid's bid to sell blinking distress lights for vehicles is just one part of a diversification move designed to lessen the company's dependence on the volatile consumer photography market.
The company's thrust into new areas was telegraphed earlier this year when president William J. McCune Jr. wrote shareholders of his plan ''to explore fields which are new for Polaroid.''
Still, the way to nonphotographic fields seems to be through familiar technological paths. Both Polaroid's trouble light and a low-cost burglar alarm it is also test-marketing use the same battery contained in the company's film packs. The light and alarm are slated to go on sale nationwide early next year.
Corporate customers are already being sought for chemicals, precision machine tools, and sonar devices bearing the Polaroid logo. Each of these offerings also springs from the company's camera and film production processes.
The burst of nonphotographic products is long overdue, analysts say. ''Polaroid is highly dependent on amateur instant photography,'' notes Brenda Lee Landry, an analyst at Morgan Stanley & Co. ''So the more they can diversify , the less they are subject to the swings inherent in amateur photography.''
Amateur photographers have been taking Polaroid earnings on a roller coaster ride recently. With the recession cooling consumer demand for cameras, Polaroid's third-quarter earnings plunged 69 percent from a year ago, to $6 million. Adding to the profit decline was Polaroid's decision to slash the value of the slow-selling SX-70 cameras it had in inventory.
Estimates of 1981 earnings vary from Ms. Landry's forecast of between $1.40 and $1.60, to a $1.90-a-share estimate from Merrill Lynch vice-president James L. Chung. Earnings peaked in 1978 at $3.60 a share, fell to $1.10 in 1979, and rebounded to $2.60 last year.
In its bid to snap back from depressed 1981 earnings, the company is relying on more than diversification. In November, it announced it would trim 6 percent of its work force, or 1,000 employees. It hopes to accomplish much of the reduction by offering employees with 10 years of service a ''voluntary severance plan.''
The layoffs and budget reductions imposed by management ''will be good for the company'' in the long run, Mr. Chung says. The company ''will be leaner and more efficient.''
Polaroid's latest product, the Sun Camera, is also expected to help it rebound. The camera features high-speed film and an electronically controlled flash designed to eliminate common exposure problems.
If Polaroid can crack new consumer markets, excess manufacturing capacity can be utilized and operating efficiency improved. Diversification, Chung observes, will let Polaroid ''enjoy better economies of scale.''
''All they are trying to do is use up production capacity that is sitting around,'' says analyst Landry. ''They have excess capacity in batteries, in sonar (range-finding equipment), and a huge extra capacity in chemicals.''
Some observers criticize Polaroid for not seeking attractive new markets and then developing new products to serve the markets. ''They are trying to find new markets'' for existing items, notes Donald W. Mitchell, managing director of Mitchell & Co., a Cambridge, Mass., management consulting firm. ''That is a backward way of developing a (marketing) strategy.''
Polaroid officials think the strategy is a straightforward way to make profits less dependent on the whims of amateur shutterbugs. ''I am not in a position to say'' how soon revenues from new consumer products will begin to flow in significant amounts, says Fred Kandel, national sales manager for Polaroid's commercial battery division. ''I can only hope it will be as soon as possible.''
Outside observers think results from the diversification will be slow to appear. ''The impact will be down the line,'' says Mr. Chung.
And while Polaroid's new consumer products will be the most visible, they may be dwarfed in earnings importance by its chemical offerings. At the moment the company sells chemicals used to cure plastics and to control the growth of plants for agriculture. ''The chemical business could be substantial,'' notes Ms. Landry. ''Kodak has a huge chemical business.''
In addition to manufacturing photographic equipment, Eastman Kodak Company has diversified into copying machines, plastics, and synthetic fibers.
So far, Polaroid's diversification moves are not troubling competitors. For example, battery manufacturers appear unconcerned about the cameramaker's plans to build demand for its thin, flat battery by selling alarms and lights that use them.
''When you look at the half billion (battery powered) devices in use in the US, I don't see many that would be powered by the Polaroid flat pack,'' says the marketing development manager of a major battery producer.
Whatever success Polaroid's diversification bid has, the company will still have to devote major resources to competing in the rapidly changing photographic market. For instance, early next year Polaroid will be competing with a new Kodak camera expected to use film contained on a flat, round disk. The camera is said to be easier to handle and offer better pictures than current low-cost cameras.
And Polaroid must still cope with the effects of unsettled economic conditions on camera buyers. Ingenious new products can help in the competitive war, Ms. Landry notes. ''Unfortunately, Polaroid cannot invent its way out of a recession.''