What Can Eastman Kodak Do Right?

Antonio Perez, Chairman & CEO of Eastman Kodak, is facing more and more pressure.  The market hasn’t been under pressure today, and the market is greeting this sale of its health imaging for up to $2.55 Billion with a resounding thud.  It is $2.35 Billion plus up to $200 million if internal rates of return can be achieved, so just assume the sale price is $2.35 Billion.  Shares are down 1.5% at $25.23.

This is the company formed in the shadow of x-ray discovery and accounts for one-fifth of its business, although it has seen the same prospects as normal film imaging with declining sales.  The company is turning in one-fifth of their business to pay down $1.15 Billion in debt and the rest for undisclosed purposes.

The company has a market cap of $7.25 Billion.  As per the last quarter balance sheet the company had $1.1 Billion in cash and $2.6 Billion in receivables, and it carried $12.2 Billion in debt and total assets arecarried as $14 Billion and after backing out goodwill and other the Assets are $8.9 Billion.  This is going to shrink the balance sheet across the board, but this pig needs some lipstick and a real makeover.  They should boost their dividend by a much larger sum, or at least do a one-time dividend.  Forget share buybacks, that’s a waste of its cash for a company in its state.

They also need to get Machiavellian on their job cuts (lots of them and all at once).  Perez is one of my 10 CEO’s that need to go, and the recent Sony settlement isn’t even close enough.  This guy may be the nicest in the world, but Eastman needs a true digital leader that knows how to do digital better then he.  Sorry, but that is what Wall Street is telegraphing.  Here was the original article from December 14 about why he has to go and here is the article from last week after the Sony digital settlement.

The street doesn’t like the sale it appears, or at least they don’t like the use of proceeds.  This might pawn part of the restructuring off onto the buyer Onex Healthcare, but the company still is restructuring. 

Jon C. Ogg
January 10, 2007