Polaroid Corporation

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Polaroid Corporation

549 Technology Square
Cambridge, Massachusetts 02139
U.S.A.
(617) 577-2000
Fax: (617) 577-5618

Public Company
Incorporated: 1937
Employees: 12,000
Sales: $2.15 billion
Stock Exchanges: New York Pacific
SICs: 3861 Photographic Equipment & Supplies; 3827 Optical Instruments & Lenses; 3851 Ophthalmic Goods; 3841 Surgical & Medical Instruments

Polaroid Corporation was founded on Edwin H. Land’s belief that consumer markets should be created around inventions generated by scientific research. His philosophy resulted in scientifically innovative products, some of which were fantastically profitable and others that were not commercially viable. Instant photography products, introduced in 1948, saved Land’s company from financial disaster and continue to be Polaroid’s principal source of income. After Polaroid stock plummeted in the 1970s, and with Land’s retirement in 1982, the succeeding team of managers, many of whom had built careers at Polaroid, began to reformulate Polaroid’s corporate culture. While the company continues to be a scientific innovator, it also has cultivated an aggressive marketing department, which bases product development on market research.

In 1926 Edwin Land’s desire to create useful products based on scientific invention prompted him to pursue independent research on polarization rather than to return to Harvard after his freshman year. After creating a prototype synthetic polarizer in New York, Land returned to Harvard in 1929. A polarizing material selectively screens light waves. It could, for example, block waves of light that create glare while allowing other waves through. With the help of George Wheelwright III, a young Harvard physics instructor, Land obtained access to a laboratory and began producing small sheets of polarizing material. Land applied to patent this process in 1929, and a patent was granted in 1934. In June of 1932, eager to explore the invention’s practical applications, Land and Wheelwright abandoned their academic careers and founded Land-Wheelwright Laboratories, backed with Wheelwright’s capital.

In 1933 the men incorporated their laboratory. Land-Wheelwright’s staff—Land, Wheelwright, their wives, and a handful of other researchers—concentrated on developing polarizing material for no-glare car headlights and windshields. Enthusiasm for their work ran high, but commercial success eluded the Land-Wheelwright crew. Rebuffed by carmakers in Detroit, the company had no customers during the height of the Great Depression.

Photography giant Eastman Kodak provided the company’s first financial break when it made a $10,000 order for photographic polarizing filters, later dubbed Polafilters. These plates, which consisted of a sheet of polarizing material sealed between two glass discs, increased contrast and decreased glare in photographs taken in bright light. Land-Wheelwright accepted the order and delivered the filters to Kodak. By this time, a friend, Professor Clarence Kennedy of Smith College, had dubbed the material “Polaroid,” and the name was adopted. In 1935 Land negotiated with American Optical Company to produce polarized sunglasses. Such glasses could screen out glare rather than simply darken the landscape, and Land-Wheelwright contracted to begin production of Polaroid Day Glasses, a longtime source of revenue for Polaroid.

In 1937 Land formed Polaroid Corporation to acquire the operations that he and George Wheelwright had begun. Eight original shareholders fronted $375,000 to back Land and his projects. They invested in Land and his ideas, allotting him a voting trust of stock that gave him control of the company for the next decade. Wheelwright left the company in 1940 to become a navy lieutenant and never rejoined the company. Researchers had devised a number of commercial applications for Polaroid polarizing sheets—such as desk lamps, variable-density windows, lenses, and three-dimensional photographs called Vecto-graphs—but most of these products never became significantly profitable.

Polaroid continued to court the major automakers, attempting to induce one of them to demonstrate its headlight system at the 1939 New York World’s Fair. The carmakers all refused the project, but Chrysler agreed to run a Polaroid three-dimensional (3-D) movie at its display. Audiences dodged water that seemed to spray out of a garden hose into the crowd and gawked through Polaroid-made glasses of oppositely polarized lenses as an automobile appeared to dance itself together in the air above them. The public loved 3-D, but filmmakers were content with the magic of color and sound, and passed over the new technology.

In another unsuccessful marketing project, variable-density windows were installed on the observation car of the City of Los Angeles. Two polarized discs were mounted in the train wall; by means of a knob, passengers could turn the inner disk so that the window gradually became grayer until it was completely dark. As with the 3-D process, the novelty of polarized windows was not hugely successful.

In 1939 Day Glasses were the source of most of Polaroid’s $35,000 profit. Although sales rose to $1 million in 1941, the company’s 1940 losses had reached $100,000, and it was only World War II military contracts that saved Land and his 240 employees. By 1942 the wartime economy had tripled Polaroid’s size. A $7 million navy contract to work on the Dove heat-seeking missile project was the largest contract Polaroid had ever had, although the bomb was not used during World War II. Polaroid produced a number of other products for the armed forces, including a device that determined an aircraft’s elevation above the horizon, an infrared night viewing device, goggles, lenses, color filters for periscopes, and range finders.

Also during the war, the 3-D technology was employed in a machine-gunner training unit. Polaroid designed a trainer in which the student operated a life-size anti-aircraft gun against the 3-D simulation of an attacking plane. Reconnaissance planes were equipped to take 3-D Vectographs, which provided relief maps of enemy territory. When viewed with polarized glasses, the 3-D pictures exposed contours of guns, planes, and buildings that camouflage obscured in conventional photographs. Vectographs were used in planning almost all Allied invasions, including that of Normandy. By the end of the war, in 1945, Polaroid’s sales had reached $16 million. But as military contracts declined, so did staff, and Polaroid was down to about 900 employees, from a wartime high of 1,250. Sales fell to just $4 million in 1946 and were less than $2 million in 1947.

By 1946 Land had realized that Polaroid Corporation was in deep trouble. Land also had come to believe that instant photography was Polaroid’s only research line with potential to save the company. Land had first considered developing instant photography technology in 1943, when, on Christmas day, his three-year-old daughter asked to see the photographs her parents had taken earlier that day. Prompted by his daughter’s query, Land conceived, in a flash, an instant, self-developing .film and a camera that would process it. By 1946, however, the research on the film was far from complete. Nonetheless, Land announced early that year that the instant camera system would be demonstrated at the February 21, 1947, winter meeting of the Optical Society of America. Working around the clock, Polaroid scientists developed a working model of the system, which allowed Land to take an instant picture of himself at the Optical Society meeting. The photograph developed itself within a minute. The image of Land peeling back the negative paper from an instantly produced picture of himself made front page news in the New York Times, was given a full page in Life magazine, and was splashed across the international press.

It was an additional nine months before the camera was offered to the public via Jordan Marsh, Boston’s oldest department store. The original camera, which weighed five pounds when loaded, sold for $89.75; film cost $1.75 for eight sepia-toned exposures. On the first day the camera was offered, demonstrators sold all 56 of the available units, and the cameras kept selling as fast as the factory could produce them. First-year photographic sales exceeded $5 million. By 1950 more than four thousand dealers sold Polaroid cameras, when only a year earlier Kodak had virtually monopolized the U.S. photography market.

The 1950s were a decade of rapid expansion. Sales mounted, spurred on by an aggressive television advertising campaign. Instant photography could be demonstrated graphically on television. Black-and-white film was introduced in 1950 to an enthusiastic public. Enthusiasm quickly turned to ire, however, as the black-and-white images began to fade and disappear. Unable to develop a non-fading black-and-white film, Polaroid provided sponge-tipped tubes of a liquid polymer, which the consumers hand applied to each picture to set the image. This awkward process was not eliminated until 1963.

Despite the inconvenience, demand for instant photography held. To accommodate growing sales, Polaroid built a plant in Waltham, Massachusetts. The company’s common stock was listed on the New York Stock Exchange in 1957. Polaroid formed its first international subsidiaries in 1959, in Frankfurt and Toronto. In 1960 it established Nippon Polaroid Kabushiki Kaisha in Japan and licensed a Japanese firm to produce two cameras for overseas sale.

During the 1960s Polaroid continued to offer improvements and variations on the original instant film and camera, although other products were also introduced. Polaroid’s first color film was introduced in 1963, along with a pack-loading black-and-white film. In 1965 the inexpensive Swinger was pitched to teens. Selling for less than $20, the camera took only black-and-white pictures, sustaining the market for Polaroid black-and-white film. In 1966 the ID-2 Land Identification system was introduced. It produced full-color laminated cards in two minutes, allowing the company to provide instant driver’s licenses and other photo identification cards. In 1967 Polaroid began construction on several new factories to boost production of cameras, film, color negatives, and chemicals. The company’s stock split two for one in 1968. During the late 1960s Polaroid was outpacing other top stock market performers. In 1970 sales reached $500 million.

In October of 1970 two black workers at Polaroid called upon other black employees to leave their jobs until Polaroid ceased all business in South Africa. Polaroid had no subsidiaries or investments in the country, but its products were distributed through Frank & Hirsch and some items were sold directly to the government. South African commerce accounted for less than 0.1 percent of the company’s annual profits. Polaroid sent two black and two white employees to South Africa to assess the situation, and in 1971 the company decided to stop selling its products to the South African government. In addition, black workers at Frank & Hirsch would receive equal pay for equal work and be educated for promotion. Polaroid established a foundation to subsidize black education in South Africa, and made $25,000 in contributions to black cultural associations. Polaroid ended its association with Frank & Hirsch in 1977.

In 1972 the October cover of Life magazine featured a cluster of children grasping after a photograph whizzing out of the new SX-70 wielded by inventor Land. The SX-70 was the first integrated camera and film system, and the pictures developed outside the camera by themselves. The public eagerly purchased the camera. Despite the fact that sales in the early 1970s continued to grow at a rate of 20 percent per year, the tremendous expense of research, manufacturing, and marketing for the SX-70 caused earnings to fall. Financial analysts began to question Polaroid’s stability. In 1974 Polaroid executives admitted that the company did not expect to make more than $3 a share that year. Actually, earnings were only 86 cents per share. Polaroid stock plummeted. By July of 1974, just 26 months after the SX-70 was introduced, the stock had fallen from 149½ to 14⅛.

In 1975 Land turned the presidency of Polaroid over to Bill McCune, a senior vice-president who had been with the company since 1939 and had worked closely with Land on the development of the first instant camera and film. Manufacture of the SX-70 remained very costly, and numerous design features required modification. Yet Land was satisfied with the camera and wished to pursue research on Polavision, an instant motion picture system. McCune and others, however, favored improving the SX-70. Highly skeptical of Polavision, McCune wanted to base new product lines on market research, rather than following Land’s method of creating a consumer demand for Polaroid’s latest invention. Land introduced Polavision at the 1977 annual meeting, and a limited introduction followed. Although a scientific marvel, the instant films lasted only two and a half minutes and were silent. Videotaping was just hitting the market, and so Polavision was never a consumer success.

Land received his 500th patent and was inducted to the National Inventors Hall of Fame in 1977. Polaroid’s corporate culture began to shift when McCune was voted chief executive officer in 1980. While Land’s entrepreneurial drive had created the company, a more diversified, market-oriented management was needed to continue to propel it. In 1982 Land retired fully, devoting his attention to research at the Rowland Institute for Science, which he had founded in 1965.

In 1976 Polaroid entered a costly and lengthy patent-infringement battle with Eastman Kodak Company. Kodak had been producing the negative component of Polaroid’s black-and-white film since 1944, and its color negative since 1957. With the introduction of the Polaroid SX-70, though, Kodak terminated its partnership with Polaroid, and began its own instant-photography research. In 1976 Kodak introduced the EK-4 and EK-6 instant cameras and PR-10 instant film. Polaroid filed suit within a week, charging 12 patent infringements in camera film and design.

Legal preparations dragged on for five years, until the trial began in October of 1981. Ten of the twelve original counts were pressed. After 75 days of testimony and three years of deliberation, U.S. District Court Judge Rya Zobel ruled that seven of the ten Polaroid patents were valid and had been infringed upon. As a result, Kodak’s line of instant-photography products was terminated in 1986. When settlement talks began, Polaroid claimed about $6.1 billion in damages, lost sales, and interest. The case was not settled until 1991 and resulted in a payment by Eastman Kodak of $925 million.

In August of 1988 Shamrock Holdings offered to buy Polaroid at $40 a share plus 40 percent of the award from the Kodak settlement. Polaroid’s board of directors rejected the offer, and soon after the company sold 14 percent of its outstanding shares to an employee stock ownership program (ESOP). Shamrock charged that the ESOP was a form of management entrenchment, and sued. Delaware courts upheld Polaroid’s position, and Shamrock raised its offer to $45 a share. Polaroid’s board again rejected the offer and subsequently announced a $1.1 .billion common stock buy-back. Shamrock again sued Polaroid in February of 1989 for management entrenchment, but Polaroid’s tactics were again upheld. The fight against Shamrock was led by Chairman McCune and I. MacAllister Booth, who had become president in 1983 and CEO in 1985. The pair pruned Polaroid staff in the early 1980s and reorganized the company into three divisions: consumer photography, industrial photography, and magnetic media.

The first success reaped from this new marketing strategy was the Spectra, introduced in 1986. The upscale Spectra came out of market research indicating that instant camera users wanted better picture quality. Again responding to this desire, Polaroid introduced Hybrid IV, an instant film of near 35-millimeter quality, during the early 1990s. Polaroid also introduced a line of conventional film and videotapes starting in 1989. Marketing strategies also continued to become more sophisticated. In 1990 a $60 million advertising campaign emphasized new uses for instant cameras. Suggested uses include recording household items for insurance purposes or keeping a visual record of properties when house-hunting. In addition, the company cultivated its non-consumer markets, which contribute at least 40 percent of photographic sales.

While Polaroid’s product lines may be more fully guided by market demand, Polaroid continues to be a research-and-development driven company. It was Booth’s hope that market research would generate stable, profit-making ventures, as Polaroid carries Land’s creative scientific spirit into the 1990s. At the dawn of the 21st century, the Polaroid Corporation has become the world market leader in instant photography, electronic imaging, and a major world manufacturer and marketer of conventional films, videotapes, and light polarizing filters and lenses. Such a high proportion (approximately half) of Polaroid’s revenues derive from international sales that the company survived the worst year of the U.S. recession, 1991, with flying colors, making the recession period one of the best ever in terms of sales. For the first time in Polaroid’s history, the $2 billion dollar sales mark had been surpassed. With the resurgence of the domestic economy and the onset of recession in Europe and Japan, the company expects its global positioning to assist in its financial performance. By the mid-1990s, the company will have undergone the biggest plant expansion in its history that includes the construction of its first ever facility for the production of advanced films for Polaroid’s new electric imaging products.

Along with major plant expansion, Polaroid has embarked on a new marketing and advertising strategy that targets market segments (business, health, industry, education, family) and promotes new products designed specifically for these segments. In fact, the blitz of new Polaroid products has surprised market analysts accustomed, over the past two decades, to criticizing Polaroid’s stagnation and moribund sales.

Polaroid products fall under the categories of core photography and high resolution imaging. Polaroid clearly has shifted away from its total reliance on its historical mainstay, the instant camera. Gone forever are the days of focusing on a single product. The company’s potentially most lucrative product is the Helios medical laser imaging system, which produces a medical diagnostic image without chemical processing. Another new and promising but far less expensive medical imaging product, the Polaroid EMS Photo Kit, is a camera specifically designed for the 35,000 emergency medical team (EMT) squads in the United States. A series of new electronic imaging products also have been developed for the business segment, including desktop computer film recorders, the Polaroid CI-5000 and CI-3000, and the CS-500Í Digital Photo Scanner. In addition, Polaroid has developed the ProCam, an instant camera earmarked for the business customer.

For the nonprofessional or amateur consumer, the long awaited “Joshua” instant camera was introduced first in Europe in 1992, and then in the United States as “Captiva” in the summer of 1993. Captiva, indistinguishable in appearance from a 35 millimeter camera, takes high quality instant photos that are not ejected in the usual manner, but stored in the rear of the camera, which in turn contains a viewing window enabling the user to see the development of the last exposed frame. Because the photos are smaller than regular-sized 35 millimeter pictures, the camera appeals to those whose lifestyles favor a more compact and instant camera. “HighDefinition” instant film for the amateur photographer came on the market in 1992, further closing the gap in quality between 35 millimeter and instant film. Despite market analyst predictions, Polaroid Corporation has transformed itself into a company of the future: a streamlined, multinational, and diverse, multi-product company.

Principal Subsidiaries

Inner City, Inc.; Olint, Inc.; Polaroid Caribbean; Polaroid Foundation; Polaroid Ges.m.b.H. (Austria); Polaroid (Belgium) N.V.; Polaroid AS (Denmark); Polaroid (U.K.) Ltd.; Polaroid (France) S.A.; Polaroid GmbH (Germany); Polaroid (Italia) S.p.A.; Polaroid AB (Sweden);

Polaroid AG (Switzerland); Polaroid Australia Pty. Ltd.; Polaroid Far East Ltd. (Hong Kong); Nippon Polaroid K.K. (Japan); Polaroid do Brasil Ltda. (Brazil); Polaroid Canada Inc.; Polaroid de Mexico, S.A. de C.V.; Polaroid España, S.A. (Spain); Polaroid (Europa) B.V. (Netherlands); Polaroid (Norge) A/S (Norway); Polaroid Oy (Finland); Polaroid Singapore Private Ltd. (Singapore).