Polaroid Corporation

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Polaroid Corporation

549 Technology Square
Cambridge, Massachusetts 02139
U.S.A.
(617) 577-2000
Fax: (617) 494-0249

Public Company
Incorporated: 1933 as Land-Wheelwright Laboratories
Employees: 11,441
Sales: $1.90 billion
Stock Exchanges: New York Pacific

Polaroid was founded on Edwin H. Land’s belief that consumer markets should be created around inventions generated by scientific research. His philosophy often resulted in products that were scientifically innovative but not commercially viable. Instant photography products, introduced in 1947, saved Land’s company from financial disaster and continue to be Polaroid’s principal source of income. Polaroid stock plummeted in the 1970s. 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 a commercial monopoly 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. Despite the fact that it had no machinery to mass produce such filters, Land-Wheelwright accepted the order, developed and built machines necessary to produce polarizing sheets and bond it to glass discs, and delivered the order to Kodak on schedule. By this time, a friend had christened the material “Polaroid,” and the name was adopted. In 1935 Land convinced 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 long-time source of revenue for Polaroid.

Land formed Polaroid Corporation in 1937 to acquire Land-Wheelwright Laboratories. Eight original share-holders 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 firm. Researchers had devised a number of commercial applications for Polaroid— such as lamps, windows, stage lights, and three-dimensional photographs called Vectographs—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 chunky 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 3-D film, the novelty of polarized windows was not commercially viable.

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, and color filters for periscopes, and rangefinders.

Also during the war, the 3-D technology forsaken by moviemakers 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 camouflague 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 500 employees, from a war-time high of 1,250. Sales fell to just $4 million in 1946 and were less than $2 million in early 1947.

By 1946 Land had realized that Polaroid Corporation was in deep trouble. Land had also come to believe that instant photography was Polaroid’s only research line with potential to save the company. The research, however, was far from complete. In desperation Land announced in early 1946 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, and was splashed across the international press.

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.

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 accomodate 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 non-fading 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 identification cards in two minutes. 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 1970 two prominent black workers at Polaroid called on 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. Some items were sold directly to the government, which used them in creating passbooks, part of the identification system that contributes to apartheid. South African commerce accounted for less than 0.1% of the company’s annual profits.

Polaroid sent two black and two white employees to South Africa to assess the situation. In 1971 based on sentiments expressed by black South Africans, the company decided to maintain its business in South Africa, but stopped selling its products to the 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. These efforts were not popular with many Americans, who favored total boycott of the South African economy until apartheid was ended. Polaroid continued its association with Frank & Hirsch until 1977, when the distributor was found to be selling products to the government once again, and Polaroid terminated the relationship.

The October 1972 cover of Life featured a cluster of children grasping after a photograph whizzing out of the new SX-70 wielded by inventor Land. The public eagerly purchased the camera, yet Polaroid stock price began to decline shortly after the introduction of the SX-70, mostly due to a general stock market decline. Despite the fact that sales in the early 1970s continued to grow at a rate of 20% per year, the tremendous expense of research, manufacturing, and marketing for the SX-70 caused earnings to fall. Financial analysts, who had always received Polaroid stock coolly, began to question Polaroid’s stability. In a 1974 conference Polaroid executives admitted that it did not expect to make more than $3 a share that year. In actuality, earnings were only 86¢ per share. Polaroid stock plummeted. By July 1974, just 26 months after the SX-70 was introduced, the stock had fallen from 1491/2 to 141/8.

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 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 established 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. Shortly after viewing the SX-70 film prototype in 1968, however, 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 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.

In August 1988, Shamrock Holdings offered to buy Polaroid at $40 a share plus 40% of the award from the Kodak settlement. Polaroid refused the offer and soon after sold 14% 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 again refused, and subsequently announced a $1.1 billion common-stock buy-back. Shamrock again sued Polaroid in February 1989, for management entrenchment, but Polaroid’s tactics were again upheld.

The fight against Shamrock was lead by Chairman McCune and I. MacAllister Booth, who had become president in 1983 and CEO in 1986. The pair pruned Polaroid staff in the early 1980s and reorganized the company into three divisions: consumer, industrial, and magnetic products.

The first success reaped from this new marketing strategy was the Spectra, introduced in 1986. The up-scale 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-milimeter quality, during the early 1990s. Polaroid also introduced a line of conventional film and videotapes.

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 is cultivating its commercial markets, which contribute at least 40% 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. In 1990 research focused on an electric camera, which stores images on magnetic disc rather than film; an area in which the company may profit from joint ventures. Other promising projects include Helios, a new medical imaging system that the company thinks could be very profitable; Joshua, a mini-camera that produces credit-card size pictures; and a printer that coverts television images to hard copy. It is Booth’s hope that market research will generate stable, profit-making ventures, as Polaroid carries Land’s creative scientific spirit into the 1990s.

Principal Subsidiaries

Inner City, Inc.; Mag Media, Ltd.; Media Duplication Services, Ltd.; Polaroid Caribbean; Polaroid Foundation; Polaroid Ges.m.b.H. (Austria); Polaroid S.A. (Belgium); Polaroid AS (Denmark); Polaroid U.K. Ltd.; Polaroid S.A. (France); Polaroid GmbH (Germany); Polaroid S.p.A. (Italy); Polaroid Nederland B.V. (Netherlands); 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.