The Polaroid Corp, once one of US industry's technological lights, filed for Chapter 11 bankruptcy protection on Friday. Most experts predict that Polaroid will never emerge, but will use the court's protection to set up a sale of its assets.
The news did not shock Wall Street, where analysts have watched the company's stock sink and debts soar as digital cameras hurt Polaroid's core instant photography business. But, it elicited a wave of sadness nonetheless.
"It just didn't have to come to this," said Ulysses Yannas, an analyst with Buckman, Buckman & Reid.
When Edwin Land and George Wheelwright formed Polaroid in 1937, its future seemed ensured. Land was a scientist whose ideas for a lens that could polarize light -- that is, make light rays move in parallel -- formed the technological underpinnings not only of instant photography, but of glare-free sunglasses and goggles that World War II pilots used to spot submerged submarines. Wheelwright was a consummate salesman who built the business around the products.
Scientists respected the company for its devotion to research; investors respected it for the popularity of its products. Indeed, Polaroid was one of the Nifty 50, the big companies that in the 1960s were seen as the bellwethers of the US economy.
But at its heart, Polaroid was always a scientific house. And appropriately, it was brought down by the cold light of numbers.
By Friday, Polaroid was backed against a financial wall. Its stock, which approached US$50 in early 1998, was selling for US$0.28 when the New York Stock Exchange halted trading Wednesday. In its filing, the company listed US$1.81 billion in assets and US$948.4 million in debts. It has US$360 million in bank debt falling due on Nov. 15, and owes its bondholders about US$575 million.
"I never thought I could lose as much on a bond of a well known company as people lost on Internet start-ups," said Don Gonsalves, a bondholder who said he had lost 81.5 percent of his investment in two years. "The alternative that would result in the biggest payoff for all creditors would be for Polaroid to be completely liquidated."
Gary DiCamillo, Polaroid's chief executive since 1995, declined to be interviewed, but the company issued a statement saying that it had lined up US$50 million in financing, and intended to cut more jobs and accelerate efforts to sell assets. The company, which is based in Cambridge, Massachusetts, has also eliminated insurance benefits for retirees, and has stopped severance payments to employees who recently left. Polaroid subsidiaries outside the US are not part of the bankruptcy filing.
How did things go wrong so fast?
They didn't. Polaroid has been deep in debt since 1988, when it bought back shares, created an employee stock ownership plan and issued preferred stock, all to fight off a takeover by Shamrock Holdings, an investor group headed by Walt Disney's nephew Roy Disney.
"They issued a lot of bonds and borrowed a lot of money, and that's put them in the hole they're in today," said Edward Lee, a photography analyst at Lyra Research.
Polaroid made strategic mistakes in the early 1990s, too. Analysts say the company never responded properly after digital technologies began eating into every photography company's film sales.
It did not go into the booming home printer business. Instead it invested heavily in Helios, a so-called dry film technology used for medical imaging that had myriad problems. By the time Polaroid got the kinks and costs out of Helios, Kodak had cornered the market with Imation, a dry-film technology it had bought from 3M. Polaroid has abandoned that business.
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