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RE: filmscanners: Polaroid's state of health

I would also add that your speculation on where the various business units
may go is just that "speculation'  and should be so labeled.
The problem is these ramblings can take on a life of their own and what is
speculation is then perceived as fact.

 -----Original Message-----
From:   Arthur Entlich [mailto:artistic@ampsc.com] 
Sent:   Tuesday, October 16, 2001 7:23 AM
To:     filmscanners@halftone.co.uk
Subject:        filmscanners: Polaroid's state of health

I wrote this posting several days ago to the Leben scan list upon the 
announcement of Polaroid's filing of Chapter 11 bankruptcy protection, 
and just realized that some of the information might be of interest to 
people on this list as well, so I'm repeating it here.


I've just spent the better part of an hour reading the full press
releases on the Polaroid site to try to get a better sense about what is
about to happen.

As others have mentioned, Polaroid is in voluntary Chapter 11 filing,
meaning they have petitioned the Court to protect them from current
debt.  This is to give them some breathing room to restructure the
company, sell off assets they feel have value outside of the company,
and look for a purchaser of the main core business which Polaroid
believes is still their instant photo business.

In the meantime, they have been provided with transition monies of $50
million plus continued income from sales to continue operations.

What this actually means is that Polaroid is continuing to run as a
company, fulfilling sales and contracts, but they do not have to pay the
debt accumulated prior to the filing ($960 million) while under Chapter
11 protection (at least not at this time).

They are "guaranteeing" that any purchases they make for goods and
services after the filing date will be paid for, and are asking their
suppliers to continue to supply goods so they can keep the company
functional, with the hopes that they can generate profits from those new
goods to help improve their state of affairs, and perhaps improve the
likelihood they can pay off more of that unsecured debt.

In the meantime, they will continue paying salaries, health plans, etc,
and try to keep their business operative while making a big effort
toward trying to find a buyer for the key business while either selling
off smaller divisions or liquidating them.

I'm speculating that Fuji might buy their film division since they use
Polaroid technology for their instant camera line anyway, and have an
ongoing relationship with them.

Unfortunately, the scanner division is probably in for some major
trouble.  Polaroid's scanner hardware is produced either in tandem with
Microtek or tweaked and rebadged Microtek designs with a Polaroid front
end in software.  I'd imagine this is less of a profit generator for
Polaroid since they are, in some fashion, the middleman, with Microtek
having to take a portion of the profits.  What makes the Polaroid
scanners such good product is higher specifications at the factory,
their attention to quality control, the software and customer
support.  These are all areas where Microtek has shown to be a bit
short.  In other words, the hardware manufacturing is just half of it,
as some who have purchased the Microsoft analogues can attest to.
Unless a major company is willing to adopt Polaroid's scanner division
employees and software designs, the best we'll be seeing is the Microtek
versions of these popular scanners.  The only real hope I see is if a
smaller or an upstart company, possibly made up of the Polaroid scanner
division staff, buy out the assets and make a go with it.

Going back to the restructuring, companies who are owed money before the
filing, shareholders of stock, and those who own corporate bonds, are
currently stuck.  The debt due is unsecured, and they will only be paid
if and when Polaroid  generates funds via sale of goods or
sale of the company and assets, and they will be paid on a proportional
basis if not enough money can be generated (the old $.25 on the dollar
or whatever) and it could be years before the outcome and money is
delivered. Preferred shareholders might fare a bit better, but common
shares are likely to plummet and be delisted on the exchanges.  After
all, the shares currently represent a company nearly a billion dollars
in debt, and any buyer will probably demand a "clear and free" asset,
meaning what the shareholders will end up owning is the debt (try
selling that!).  Bond holders will get no interest payments for the time
begin and also will get only a proportion of their face value (if that)
should liquidation or sale occur.

Currently, Polaroid DOES NOT have the permission of the Court to carry
out warranty repairs.  Warranties are a liability expense to unsecured
holders. Polaroid is petitioning the Court for the ability to honor
warranties so they can service their clients, and usually, the Court
will agree since it is not beneficial to a company to alienate their
main clients, even if the company is to be sold, (some will have long
memories ;-)) but they may place restrictions on how much money can be
used toward warranty services.

Polaroid indicates the filing is only for the US division of the company
and that all other divisions are fully operative, but I don't know how
long that can last, unless their "foreign" divisions are actually
distribution companies that aren't fully Polaroid subsidies, in which
case their Polaroid holdings will slowly just disappear.  I have no idea
how Polaroid Canada fits into this.

I'm not one who is easily torn up by the potential disappearance of a
corporation.  After all, they are built as "amoral" entities to protect
the owners from having to accept responsibilities (legally and otherwise)
for the actions of that entity.  Having said that, if Polaroid is
dissolved, I will truly miss it.

There aren't many large businesses that I can honestly state that I
respect, or which have treated me well throughout my business
relationship with them, but Polaroid has been one.  From the first time
I contacted them, when I was about nine years old, asking them for
samples of polarizing filters for a science project (which they
generously sent me), to my dealings with their video division and more
recently their scanner division, they have always treated me with the
utmost respect and decency.  It is obvious that they have promoted a
corporate culture that brings in quality people who care about the
company they work for and the clients they interact with, and even
throughout the last several months of hardship, they have maintained
high standards.  David Hemmingway, on this list, is one such example.

One can only hope that this type of corporate philosophy can be upheld
and transferred to whomever takes over the company assets.  I hope
this is not an indication that their business philosophy is of a
bygone era which cannot survive in toady's "dog eat dog" corporate
environment, because if that is the case, we are all in for a downhill
ride in our dealings as consumers, and in our dealings as humans.



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