Kodak Launches a Printer Offensive

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With any new technology, there are invariably glitches. The team faced a near-disaster a year ago when they discovered that the pigment particles in their inks were settling at the bottom of the storage containers, like sediment in a wine bottle. Unless the situation was remedied, image quality would suffer.

A Stickler for Quality

The problem came fairly late in the development process—the team had already "frozen" the ink formula so they could design other components of the printer to go with it. The temptation was to try to fix things without changing the ink recipe. The scientists considered putting a small mechanical mixer in the storage tank. But in the end they decided it was too risky to do anything but reformulate the ink. That led to a day-and-night work marathon. A month later, the team had its solution: milling the pigment particles much smaller, so they would stay suspended in liquid. The formula was set, and Tousi came up with a motto: "Don't dink with the ink."

Throughout the whole process Tousi was the stickler for quality. Dubbed "Queen of the Geeks" by her employees, Tousi carries a loupe for magnifying photographs practically everywhere she goes. She even takes prints into the parking lot to study them under harsh sunlight. Time and again, Tousi sent engineers back to the drawing board because their results weren't up to her standards.

Last June, it was Tousi who had to tell Perez that they weren't going to be able to begin marketing the printers for last year's holiday shopping season. She felt more tests were necessary to assure the highest print quality. In an effort to boost the team's morale, Perez flew to San Diego to meet with the entire engineering staff. He stood on a table so he could see over their cubicle partitions. He recalls telling them: "Slipping by a quarter doesn't matter that much, but you have to promise me that these printers will work perfectly. We have only once chance to do this right. If our first introduction fails, we fail."

HP Downplays the Threat

Analysts who have seen Kodak's printers have come away impressed. "The print quality is really good. They're at least as good as everybody else," says Larry Jamieson, director of industry-watcher Lyra Research. But Perez and Kodak face daunting challenges as they enter this market. HP dominates with a 33% worldwide market share and a sterling reputation among PC and digital-camera users. "HP has a lot of customer loyalty. They build a great product. The printers don't break," says analyst Alyson Frasco of market researcher Interactive Data.

HP downplays the threat from Perez. "He's going into a gunfight with a knife," taunts Nils Madden, marketing director for HP's inkjet business. Madden says HP is spending tens of millions a year on improvements in inkjet technology to make better prints and printers that work faster. He says consumers shouldn't be put off by ink prices. If they buy HP's economical Photo Value Pack, which combines paper and ink, the cost per print is about 29 cents.

What's next? Plenty of uncertainty. Analysts expect HP to sit tight for now and see whether Kodak gains a troublesome amount of market share. If it does, HP and the others might be forced to discount ink. So it's up to Perez and Kodak to show they have a truly game-changing product.

Perez seems immune to negative thoughts. He tells a story that shows just how confident he is of success. "J. Paul Getty said you have to do just three things to be successful: get up early, work hard, and strike oil," says Perez. "I didn't strike oil in my career, but I did strike ink."

Hamm is a senior writer for BusinessWeek in New York.