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Opal, Onyx Spell Future for Polaroid

NEW YORK -- Thanks largely to the instant gratification offered by digital cameras, Polaroid Corp. sees a difficult future for film sales -- a staple of its business -- but that doesn't mean the inventor of instant photography should be counted out just yet. In fact, it sees an opportunity that would give it greater market penetration than it has ever known: instant digital printing.

And it has developed two technologies -- code-named "Opal" and "Onyx" -- which it believes will make it the standard-bearer for the digital imaging industry.

"The Opal and Onyx technologies will revolutionize how we move digital images from pixels to prints," said Gary T. DiCamillo, chairman and chief executive officer of Polaroid. "These are real game changers -- true innovations that will set new standards for instant digital printing quality, mobility and affordability."

DiCamillo envisions the two technologies finding homes in a variety of mobile printing tools -- like a mobile printer extension for PDAs and wireless phones -- as well as in retail kiosks, microlabs and a new generation of home photo printers.

Indeed, the two technologies are also part of Polaroid's strategy to recapture the medical and scientific imaging markets. And, the technology may help it extend even further. After all, bar codes, charts and workforce schematics can all be processed as digital images. A phone printer extension could even print movie tickets.

Polaroid breaks digital imaging into three distinct markets: capturing, sharing and printing. To date, it says, the industry has focused on the first two areas. Newer and better cameras continue to hit the market, offering better and better image resolution, while photos are shared with the world at large through e-mail and Web sites. But printing remains an under-developed area. Indeed, DiCamillo said surveys indicate that only two percent of all images printed last year were digital -- a small percentage considering that more than 11 million digital cameras were sold last year.

Why? Printing digital images is often complicated and expensive, and the prints themselves are often of sub-standard quality or lacking in durability. Enter Polaroid with a new slogan: "One-click simple."

And the company sees printing as the area to be in. Competition in the camera space is fierce and margins are low, making it a difficult area to make a profit (though Polaroid has managed to capture the number one position in digital camera sales in the food, drugstore and mass-merchandising outlets, and second place to Sony overall). And, according to Sandra B. Lawrence, senior vice president and general manager of instant digital printing at Polaroid, Web sites (the sharing space) are good for building brand awareness and communicating with customers, but are not steady profit generators by themselves.

"[Printing] is the buried treasure," she told analysts and reporters at Polaroid's unveiling of the Opal and Onyx technologies at the Digital Sandbox in Silicon Alley. "It's where the money is."

DiCamillo agreed. "There's very little profit in selling cameras...The potential profit in digital imaging lies in consumables and in the infrastructure."

That's where Opal and Onyx come in. They are printing technologies that DiCamillo predicts will change everything.

Today there are basically three technologies for printing digital images: Dye Diffusion Thermal Transfer (D2T2), Thermal Wax Transfer and Inkjet. All three have their drawbacks. D2T2 produces high quality, durable prints, but has limited sharpness, limited speed and has a high energy requirement. Thermal Wax Transfer is fast, but creates prints of limited quality and durability. Inkjet creates prints with high image quality, but it is complicated, costly, slow and sensitive to light and environment because it lacks a protective coating.

According to Vice President of Media Research and Development Dr. Samuel H. Liggero, whose team spent the past two years developing Opal and Onyx, the two technologies take the best qualities of D2T2, Thermal Wax Transfer and Inkjet and combine them into a single thermal print medium that rapidly creates high-quality, durable prints.

Opal is the color technology. It uses heat to transfer dye from a donor sheet -- an ultra-thin donor ribbon coated with what Polaroid calls a "frozen ink" -- to a receiver sheet. Whereas the dye uses in D2T2 consists of about five percent ink and a great deal of water, Opal consists of 30 percent ink. Consumer printers using the Opal technology will be optimized for mobility and battery operable, and should print photograph-quality prints in 30 seconds. The technology will also find its way into commercial microlabs and kiosks -- where it will be optimized for speed, capable of producing 50 to 60 prints per minute.

Onyx is the low-cost monochrome technology. That is not to say it will necessarily always print images in black and white. Polaroid plans to put Onyx-based products on the market with a number of different single-color sheets. Whereas Opal uses two sheets -- a donor sheet and a receiver sheet -- Onyx uses a single inexpensive sheet coated with a dye and an acid. Heat transforms the dye into an image. In addition to photographs, Onyx will be able to create stickers, removable tattoos, and logos and decals.

Polaroid has adopted a new business plan centered on the two technologies. It plans to continue supporting its film business -- which it said will continue to generate healthy margins and cash flow for a number of years -- but it has also created a new instant digital printing business focused on Opal and Onyx. It now plans to operate its traditional business for profitability rather than growth, while reducing its manufacturing capacity and gearing up for the revolution DiCamillo and Liggero feel Opal and Onyx will create in the imaging industry.

"Polaroid has reached the time for change and it's driven by the exponential growth of digital imaging -- the same force that is both eroding our traditional business as it ironically helps build a new foundation for the future," DiCamillo said. "...These two printing platforms will form the building blocks of our digital imaging business strategy. Polaroid is entering an era marked by alliances, partnerships and open architecture, and our digital printing business will fit into that model. Polaroid will concentrate on its strengths -- brand equity, product innovation, well-developed trade channels and promising intellectual property -- but we'll work with others to develop product applications and new products."

Licensing deals forthcoming?

Indeed, the firm is presently negotiating terms for Onyx-based partnerships with two Fortune 500 companies in the wireless space. Lawrence, said Polaroid has signed Letters of Intent with both companies and anticipates making formal announcements this summer.

Apparently, partnerships are the new name of the game for Polaroid. It plans to outsource much of its manufacturing and use licensing of its intellectual property to create new revenue streams while it makes the transition from its silver halide film-based business to the new digital world.

"Partnerships must be formed across technologies, they must be formed across platforms and even across industries," DiCamillo said.

The company said the first Polaroid-branded Onyx consumer product should hit shelves by the end of the year. Opal products will make their entrance in 2002.

"Polaroid will prove that instant and easy will always rule," Lawrence said.