Polaroid: Out with the Tide?

One of my favorite sayings is that “a rising tide raises all boats”, which I view as shorthand for how cooperation between competitors for the good of the industry help all involved. The current economic situation looks more like ebb tide in the Bay of Fundy, where the water level can drop as much as 48 feet in less than seven hours. As we’re seeing in many industries, not all companies are going to manage to stay afloat under these conditions. That’s going to be especially true in the flat panel HDTV market; the economic crisis is likely to accellerate the expected brand consolidation.

There are just too many brands on the market at this point. It doesn’t matter much whether the products are any good or not; there just isn’t enough shelf space to show all these different brands. The consumer electronics retailers are contracting, as witnessed by the demise of Tweeter, Circuit City, and CompUSA (the brick and mortar portion). This leaves fewer outlets available for the products, and there are limits to how many brands a retailer can afford to carry.

One of the companies at risk to get swept out with the tide is Polaroid. Once the proud name of the company that made instant photography a worldwide success, it was bought by a holding company called Petters Group Worldwide in 2005. The Petters Group was rocked by a financial scandal earlier this fall, and last week the company executive responsible for finances pleaded guilty to federal charges that he helped the company evade as much as $20 million in federal tax payments.

Last week, Polaroid filed for Chapter 11 bankruptcy protection from its creditors. According to a company press release, Polaroid has sufficient cash reserves to ride out the financial restructuring and plans to continue to ship product to its retailers. The company will continue to honor customer warranties and plans to bring out new models in 2009. The press release also states that the company will work with “our suppliers and contract manufacturers to fulfill retailer demand“.

Ah, but there’s the rub. If there’s no retailer demand, it’s going to be difficult to keep the revenues flowing. And Circuit City was one of the retailers that carried a lot of Polaroid product; if the company has a lot of receivables tied up in that bankruptcy, it may be a while before they see any of that money (if ever).

I recently heard that the Olevia brand (formerly of Syntax-Brillian) is going away, and now it looks as though Polaroid belongs on the endangered list. This will be a tough time for even the largest brands — Philips has sold its brand to Funai for the North American market — so expect that many of the lesser lights are going to be left high and dry before the tide finishes falling.