10 CEO’s Who Need to Leave: Antonio Perez of Eastman Kodak

Shareholder groups are becoming more and more activist groups and this trend will continue in 2007.  Private Equity and LBO Groups can only acquire so many companies, and there are only so many candidates that can run behemoths.  The best way to see change is right at the top in many cases and there is a slew of US public companies that would do far better if they could replace current management.  These aren’t in any ranked order, so the first isn’t the worst and the last isn’t the best of the worst.  The problem in stating this is that it is very easy to come in and criticize, yet finding replacements for companies this size is not exactly an easy feat.  Private Equity as a sector has taken all the talented guys, and they haven’t stopped with the age limits that many public companies live by.  There just aren’t too many Lou Gerstner and Jack Welch carbon copies out there.

Eastman Kodak’s (EK) Antonio Perez has been lightly credited with starting the turnaround that "Ain’t exactly turned….".  This Chairman/CEO is probably too entrenched and too dug in to get the boot here, but by the review of last quarter’s call he seems a bit too meek.  Eastman Kodak hasn’t really been able to recapture the massive losses out of traditional film to digital film and digital printing, and its competition from overseas is still coming.  That isn’t Mr. Perez’s fault per se, but a "new world media guy" may be what the company needs.  The secular exodus away from silver eating film has been ongoing and happened before he got there, but the  waves of layoffs haven’t been swift and sudden and the turnaround is still yet to be seen.  Even though the stock has recovered more than 25% off of 2006 lows it is still thought of as dead money.  The stock seems to have established a floor around $20.00 but shares arew down 66% from the highs back in the 1990’s and have been reliquished to the "value" and "dead money" stocks.  Its estimated EPS of $1.20 target for 2007 really seems to be pricing in a proper turnaround, yet that doesn’t even give it a forward P/E of under 20; and that isn’t good for a company that isn’t growing anymore and just trying to live off of legacy operations.  Mr. Perez actually has a good reputation and has been well thought of before, but even if they didn’t fire him you would wonder why he would be excited to even be there.  The CFO transition was just completed recently, so you never know how the management team will react from here.

Jon C. Ogg
December 14, 2006

This is part of "THE 10 CEO’s THAT NEED TO GO"series coming out today and tomorrow. Jon Ogg can be reached at [email protected]; he does not hold securities in the companies he covers.