Kodak shareholders meeting

[aldevo]

I agree with the both of you.

After years of endless restructuring analysts are going to be gun shy and they will want to see results. And by the way - you may also have noted that EK managed a $17 million profit only after "mysteriously" lowering R&D costs $42 million. I think they REALLY felt compelled to show that profit this quarter...

Restructuring has consumed lots of money - in the end what else could Kodak have really done with what was left over? By my reckoning they will still have about $1.1 billion in debt (and not necessarily long-term at that) after the Health unit sale is compplete.

There's a part of me that believes that EK's foray into the ink jet printer market may well have more to do with the fact that entry into the market could be accomplished for a "mere" $400 million. Well, that and Perez having come from an outfit that is a leader in the market - which might impart some short-term credibility to the effort. And there are some industry analysts who, frankly, doubt that photo inkjets are much of a growth business. You need more than a $250 ink jet printer to produce the same quality output you can get at Wal-mart for $0.19 a print. And consumers are realizing that.

Minimally, I think the inkjet market is going to be rough sledding. The two words that come to mind are "price war" and EK's competitors have much deeper pockets with which to wage one.

Where the film operations are concerned - any time you try to sell something for which there would be relatively few perspective buyers - there's a lot of uncertainty about the price. I think you can make a case where both extreme scenarios (i.e. inkjet printers are a runaway hit or a failure) hasten a sale of the film operations. Both for different reasons.

 

[Photo Engineer]

Gordon;

Our youngest daughter works at Xerox on advanced printing for the publishing industry. She cannot talk about her work, but has said some of the things they have are truly amazing.

I have seen one of their advanced machines as a member of the Science and Technology group for the local school system. I would have to agree that Xerox has a lot of stuff. I wonder how they will do head to head.

PE

 

[HerrBremerhaven]

Gordon,

I am not talking about financial writers - I am talking about the analysts at Wall Street firms that cover Kodak. Perhaps you are unfamiliar with the analyst's role in the stockmarket? These are industry specialists working at the major underwriting and trading firms. Their analyses and resulting Buy/Sell/Hold recommendations are key advisories to their firm's own trading positions as well as to those firms institutional clients.

If you think these people are just pundits you are very mistaken. They move huge sums of money in the market - and you can bet the farm that public companies are very responsive to their questions and analyses.

BTW: Top level Street analysts often command eight figure incomes; well above the salaries of many of the CEOs of the companies they cover. These are not low-level, green eyeshade number crunchers.

And yes, because many of them advise "specialist" firms which are "buyers of last resort" in making a market in certain stocks in the NYSE - they are very tuned-in to the performance of the companies they cover.

Hello George,

A close friend of mine is an analyst at a very large firm. Perhaps it is better to point out past occurances. At one point not long ago, some analysts suggested breaking up Apple, switching everything to Windows, or halting hardware manufacture to become only a software company. That was a time period when Dell was held up as the model of how a computer company should function. So now here we are a few years later, and market capitalization of Apple is greater than Dell . . . funny how that works out.

Now that is not to say that whatever EK does that might be contrary to analysts suggestions will be the best course, yet it is harder to find companied that swayed to analysts wishes. As much as we badmouth Perez, if he simply did whatever the majority of analysts suggested, I truly believe EK would be gone as a company in only a few quarters.

The reporters are a different matter, and many of them are pundits. It would be the rare reporter that could perform the job of an analyst, or that of a CEO.

The cycle is often buy as many competitors as possible to make your company as close to being a monopoly as governments will allow. Then when the company is too big to function efficiently, sell of the divisions to others, until the company is again small, and can then merge with another company. This starts the cycle over again, though perhaps another name or another company. During all this change, lots of institutional investors are making money on the volatility of the market. Stability is the anti-thesis of potential financial gains.

Analysts are quite good at what they do, but they are not equiped to run manufacturing companies. That should be the point of what I posted. People whose emphasis is financial aspects can make good CFOs, or maybe CEOs of financial institutions. Let financial people call too many shots, then you end up with many of the problems that major auto makers have experienced (or are currently experiencing). Sustainability means more than crunching numbers.

Film generates good profits, and enjoys good profit margins at EK. Obviously at whatever point that was no longer true, then they should close or dump that division. Until that time comes, they need to emphasize the other businesses they now own; Kodak could easily be known as the giant in printing, but they need to change that public perception of being a film company.

Ciao!

Gordon Moat
Dead Link Removed

 

[HerrBremerhaven]

Gordon;

Our youngest daughter works at Xerox on advanced printing for the publishing industry. She cannot talk about her work, but has said some of the things they have are truly amazing.

I have seen one of their advanced machines as a member of the Science and Technology group for the local school system. I would have to agree that Xerox has a lot of stuff. I wonder how they will do head to head.

PE

Hello Ron,

I just attended the printing industry trade show Print Week. Definitely for on-demand, low volume, and variable data printing, Xerox, HP, and Kodak GCG are the main players. All have slightly different technologies to accomplish similar aims. I have samples and technical information from all of them, and from several smaller companies. I also have many overviews and recommendations from paper companies about the various printing choices from these companies.

Since I am working on a portfolio, I am looking into who is running which machine from which company. I was amazed at the latest Kodak NexPress solution, especially since I have considered the Xerox iGen to be the best choice. Both companies are slightly ahead of HP, which Antonio Perez probably enjoys.

It is that perception that Kodak is primarily a film company that somewhat works against there other technology. Xerox is known as a company that sells to businesses, something that Kodak would do better to establish as their primary perception.

In some ways I see film at Kodak more like motorcycles at BMW. In the case of BMW, their motorcycle division has barely been profitable, and has always had somewhat low (though stable) sales volume. The automotive division makes possible the traditional motorcycles sales, so maintaining that heritage; yet BMW has the perception of being a car company, even to the point that many in public never heard of BMW motorcycles.

I am also reminded of a question that pops up on occaission from my friends. They ask is Kodak will stop making film soon. To which I usually reply that Kodak are still bringing in over $3 billion (revenues) a year from film. So far none of my friends has doubted why Kodak still make film when it brings in such a large amount of revenue.

Ciao!

Gordon Moat
Dead Link Removed

 

[Photo Engineer]

Aldevo;

Perez also said that the restructuring stops this year. He said that 2007 marks the last year of restructuring at Kodak. I hope that is true.

Gordon;

If you saw the Xerox equipment demonstration CD, it was our youngest daughter's hands in the video doing the demo. She cut that CD nearly a year ago. The POD equipment is truly amazing. I have seen a demo of it at the Xerox Woodcliff division.

PE

 

[aldevo]

PhotoEngineer,

I am aware of Perez's assertion that the restructuring will be completed in 2007. Nevertheless, the additional 3,000 layoffs announced yesterday came as a surprise to the market and it was not well-received by investors. As we both know, there are signficiant charges associated with layoffs and these had not been anticipated. Maybe that's the reason why some found Kodak's gudiance curiously low. I don't know.

But, on the plus side, Xerox's progress should give us some evidence that turnarounds are possible. They certainly looked all but done for in 2001/2002...

 

[aldevo]

Hello George,

A close friend of mine is an analyst at a very large firm. Perhaps it is better to point out past occurances. At one point not long ago, some analysts suggested breaking up Apple, switching everything to Windows, or halting hardware manufacture to become only a software company. That was a time period when Dell was held up as the model of how a computer company should function. So now here we are a few years later, and market capitalization of Apple is greater than Dell . . . funny how that works out.

Now that is not to say that whatever EK does that might be contrary to analysts suggestions will be the best course, yet it is harder to find companied that swayed to analysts wishes. As much as we badmouth Perez, if he simply did whatever the majority of analysts suggested, I truly believe EK would be gone as a company in only a few quarters.

The reporters are a different matter, and many of them are pundits. It would be the rare reporter that could perform the job of an analyst, or that of a CEO.

The cycle is often buy as many competitors as possible to make your company as close to being a monopoly as governments will allow. Then when the company is too big to function efficiently, sell of the divisions to others, until the company is again small, and can then merge with another company. This starts the cycle over again, though perhaps another name or another company. During all this change, lots of institutional investors are making money on the volatility of the market. Stability is the anti-thesis of potential financial gains.

Analysts are quite good at what they do, but they are not equiped to run manufacturing companies. That should be the point of what I posted. People whose emphasis is financial aspects can make good CFOs, or maybe CEOs of financial institutions. Let financial people call too many shots, then you end up with many of the problems that major auto makers have experienced (or are currently experiencing). Sustainability means more than crunching numbers.

Film generates good profits, and enjoys good profit margins at EK. Obviously at whatever point that was no longer true, then they should close or dump that division. Until that time comes, they need to emphasize the other businesses they now own; Kodak could easily be known as the giant in printing, but they need to change that public perception of being a film company.

Ciao!

Gordon Moat
Dead Link Removed

I agree with you 100%.

Most manufacturers in the EU and Americas are forced to finance their operations with debt. Much of it is high-yield and the Hedge Funds are the largest buyers in these markets.

Corporate finance in the EU and Americas have tried to create a market for their high-yield bonds for a very long time. The result is that Hedge Funds can descend on these operations and jerk the management around like puppets because they control the appetite for the company's debt. Not surprisingly, most financial analysts are a lot more interested in the debt offerings of manufacturers than the stocks themselves.

Now CFOs are complaining about Hedge Funds and this is akin to Dr. Frankenstein confronting his own monster and trying to convince it that it doesn't know its place.

Kodak's brand transformation will be very difficult execute. They have traditionally been a maker of low-priced consumables and, for better or worse, they are now a maker of consumer electronics. Kodak hasn't really done much in the digital world for photo enthusiasts. And, like it or not, inkjets will become, increasingly, an enthusiast market. The rest of the photo takers will simply be content to pay a few cents to Walmart or Costco for prints - or, as is increasingly the case, eschew reflection prints altogether.

Apple did have some credibility in high-priced electronics before tackling consumer electronics. The gap wasn't nearly as large as the one Kodak faces now. They were pioneers in both PDAs and MP3 players and still couldn't make the former work for them.. Kodak, on the other hand, is arriving late to the party.

But none of that really matters to me - I just want to be able to buy Tri-X and the odd roll of T-max for a bit longer...

 

[Photo Engineer]

PhotoEngineer,

I am aware of Perez's assertion that the restructuring will be completed in 2007. Nevertheless, the additional 3,000 layoffs announced yesterday came as a surprise to the market and it was not well-received by investors. As we both know, there are signficiant charges associated with layoffs and these had not been anticipated. Maybe that's the reason why some found Kodak's gudiance curiously low. I don't know.

But, on the plus side, Xerox's progress should give us some evidence that turnarounds are possible. They certainly looked all but done for in 2001/2002...

Those layoffs were announced along with 500 immediate layoffs about 2 weeks ago. I posted it here. Is this a post you missed? It is my understanding that this was not 3000 more but the 3000 already mentioned several weeks ago.

PE

 

[aldevo]

Those layoffs were announced along with 500 immediate layoffs about 2 weeks ago. I posted it here. Is this a post you missed? It is my understanding that this was not 3000 more but the 3000 already mentioned several weeks ago.

PE

I must have missed it! I don't think I was the only one, however....

Most of the announcements concerning Kodak's earnings cited that 24,000 layoffs had been performed with a total of 27,000 planned. And yesterday, that number became a planned total of 30,000 due to 3,000 additional layoffs.

Those additional 3,000 layoffs were not announced during the earnings call and the 27,000 number was raised by at least one analyst. That would have been the time to provide a correction but none was offered.

An odd sort of mis-step. Nothing malicious behind the omission, I'm sure, but strange that there should be so much surprise a week later.

 

[Photo Engineer]

Aldevo;

I was wrong and you were right. Kodak added the 3,000 to the previous figure.

Sorry I had the facts wrong.

PE