This seems like a big win for Flextronics. Flextronics already has much of the manufacturing for Xerox WorkCentre (formerly Document Centre) products, and probably other lines as well. So here in Rochester, lots of jobs have been sent to Singapore and China or at least transferred to Flextronics corporate structure.
In the digital consumer market, Kodak is counting on developing new applications for digital capture and image management to enhance its position. I see this as interesting but inherently very risky. For over a hundred years the vast majority of amateur shooters have not cared much about storage and organization of images. What makes Kodak think that will change? As slick as the software might be, Joe Consumer will quickly drop such technology if it gives them any problems in installation, compatibility and stability issues, etc. Word of such problems will spread like wildfire among a market of users that doesn't care much about working through such problems nor about changing their expectations.
Then there's the product churn issue. As Kodak is (inherently?) inefficient, how will they make profit in the fast-paced digital market? Outsourcing to Flextronics is an admission that they can't do it themselves profitably ... or profitably enough.
Another source of revenue and growth for Kodak in the digital world is sensor technology. This is where I think they actually have some strength. Developing sensors for companies like Olympus, Leica, etc., is not only potentially profitable, but important in terms of in terms of advancing digital capture. Can they move ahead in this area? Innovating and advancing in this sector is really important to them. Peraonally I'm neutral on their prospects, but do think they have the assets to be successful. Execution will be critical.
Also note in the quarterly results that they are still exploring what to do with the medical imaging unit. I don't completely understand the financials of this unit, but I see the health care imaging field as a potential for revenue and growth. The potential sale of this unit seems odd to me.
The similarity between Kodak and Xerox is that neither have managed the transition to software/applications focus well. Xerox has done somewhat better, perhaps because of (very) slightly better/smarter management, especially at the middle management level and X's willingness to ge more agreesive with changes at that level. Kodak's culture made that much more difficult.
All-in-all, Rochester has been hit hard. Kodak used to be the largest employer here, with Xerox number 2. They now trail the University of Rochester in employment.
