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.

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