Polaroid developing new products to snap back in sales, profits

Too bad you can't just press a button, wait a minute, and have a pared-down, diversified, booming company appear before your eyes. That has been Polaroid Corporation's ideal picture of profitability for almost five years now. And, well, it's still developing.

But the announcement of a new high-quality film is garnering some guarded optimism from financial analysts. Examples of the film were shown at Polaroid's annual meeting this week.

``Until now, instant film suffered not only from a price disadvantage but a quality disadvantage,'' says Michael Ellmann, a market analyst at Wertheim & Co. ``Polaroid has come quite far in reducing the quality disadvantage.''

James Magid of L. F. Rothschild, Unterberg, Towbin calls the quality ``terrific'' -- comparable to 35 mm. ``It's a wonderful development for consumers who already have Polaroids, too. Imagine having a three- or four-year-old camera that's suddenly producing better pictures.''

But the film is not ready for market yet. Nor is the ``radically new'' electronic camera announced this week by Polaroid's chairman and chief executive, William J. McCune. Both are expected out within a year. Meanwhile, ``this is [yet another] transition year for Polaroid,'' Mr. Magid says.

The Cambridge, Mass., company's last big year was in 1978: Net earnings topped $118.4 million on sales of $1.37 billion. Since then, competition from Eastman Kodak's instant camera and the swing in shutterbug tastes toward point-and-shoot 35-mm cameras have taken their toll.

Polaroid still holds 70 percent of the instant-photography market and has regained some ground lost to Kodak's instant. But Polaroid's share of the US camera market has slipped from 21 percent in 1981 to less than 15 percent today. Sales last year totaled $1.27 billion and earnings have dipped to $25.7 million.

So two key questions still beg an answer: Will Polaroid's core market in amateur photography rebound? And which, if any, of its new ventures will become big profit centers?

Not surprisingly, analysts supply diverging answers.

The new film and cameras are not enough to halt the shift away from instant photos, according to Mr. Ellmann at Wertheim. ``Instant photography is a fad market that has had a very long life. It is valuable only in certain narrow situations: at a party or when a baby is born. In these kinds of situations consumers are happy to pay an 80 to 100 percent premium. But for the general recording of memories, how long it takes to develop is not crucial,'' says Ellmann. Low price, the ability to get copies, and a good-quality picture are important, he adds.

But Mr. Magid at Rothschild points to progress made and expected. ``Polaroid has achieved two of its three objectives'': first, a focused, well-exposed picture every time; second, picture quality as good as any other camera; and the third -- yet to be attained -- photos at costs comparable to 35 mm.

``If they could achieve all three, Polaroid could capture half the photo market. But I don't expect that to happen soon.'' Magid does allow that the new camera may be the start of a comeback. He predicts, ``Next year will be a super year if that [film and camera] system can be introduced in volume.''

Meanwhile, Polaroid management is not pinning all its hopes on the amateur market. Through joint ventures and acquisitions, it has shifted from a one-product, consumer-oriented company to three divisions emphasizing both the consumer and business markets.

Polaroid's rainbow logo now adorns videocassettes made by JVC (Japanese Victor Corporation) and 8-mm home video cameras produced by Toshiba. Polaroid manufactures its own premium-grade personal computer floppy discs, a 35-mm film, and a $100 hand-cranked Autoprocessor -- a bread loaf-size box that develops the negatives in a minute (a motorized model is expected soon). Through computer retailers, Polaroid has been selling Palette -- an $1,800 box that can take black-and-white charts off a personal computer and produce color Polaroid snapshots, transparencies, or 35-mm slides.

The array of products reflects Polaroid's niche-marketing tack -- targeting small but, it hopes, developing markets.

Since the 1982 departure of founder Edwin H. Land (who last month said he will sell his 8.3 percent stake in the company), Polaroid has switched from a product-driven business strategy (``experiment until we get something, then sell it'') to more of a market-driven approach (``find out what the consumer wants, then make it'').

Shifting gears has not been easy. The 48-year-old company has made heavy infusions of capital into research and development. It just completed construction of a new microelectronic and materials center. And to cut payroll costs, the work force has been trimmed from 21,000 in 1979 to 13,402.

A charge of $30 million for a severance program affecting 400 more workers pushed company earnings into the red in the first quarter of 1985.

Morale was affected. But according to Dionne Lathrope, manager of internal communications, now most people have stopped worrying about where they fit into the new business plan.

Just before this week's annual meeting, the press and analysts were allowed to preview prototype products, including a lightweight, flexible liquid crystal display (LCD) of layered plastics (most LCDs are made of glass sandwiches), a 1.2-megabyte disc under development, and a version of Palette that can take high-quality photos off a videotape machine.

Of the LCD, Magid comments, ``It's hard to know at this point whether they've got a $100 million product or nothing.'' And that comment can apply to many of the prototypes and new products hitting the market.