Kodak shares plunge on bankruptcy worries

The company hires lawyers to help in restructuring efforts. The shares drop well below $1. Once the giant in photography, the company hasn't been able to succeed in a digital era.

By Charley Blaine Sep 30, 2011 3:09PM

Updated: 4:17 p.m. ET

 

Eastman Kodak (EK) has hired law firm Jones Day for restructuring advice as it faces growing concerns from investors over its turnaround prospects, The Wall Street Journal reported this afternoon.

The restructuring could include asset sales or other measures, including even a bankruptcy filing. Kodak CEO Antonio Perez told employees, however, that the company does not intend to seek bankruptcy protection. Kodak has 18,800 employees worldwide and is the dominant employer in Rochester, N.Y., where it is headquartered.

The move to hire restructuring lawyers from one of the nation's largest law firms signals Kodak is intensifying efforts to ensure it has the financial wherewithal to complete a difficult strategic and financial revamp.

Shares in the 131-year-old company have dropped 73% this week following Kodak's disclosure that it pulled $160 million from a credit line. The shares are down 84% this year.

That drawdown heightened concerns about the company's cash flow and triggered downgrades of its credit rating. Shares were down 53.8% to 78 cents today, around their lowest level since at least the 1950s. Shares have been halted several times today.

Kodak was a proud member of the Dow Jones Industrial Average ($INDU) for 74 years but was removed in 2004.

Its core business was gutted by the emergence of digital technologies. The company was organized in 1892 by George Eastman, who was an inventor of simple-to-operate cameras and films. Users of the first Kodak camera would ship their cameras to the company, which would process the films.

After that, it built up a global business of making film, printing paper and cameras. It has been the biggest supplier of film to the motion-picture industry. Its chemical operations were spun off as Eastman Chemical (EMN) in 1994.

The Journal said it was not clear what Kodak's next moves might be. It did not disclose exactly what it wants from Jones Day.

While Jones Day's restructuring lawyers have advised major companies on bankruptcies, they also advise clients on a range of other paths for improving their finances. Those possibilities include raising new debt or equity, and asking creditors to forgive debt in exchange for ownership stakes in a company, the Journal said.

Kodak, whose operations burned $847 million in the first half of the year, had $957 million in cash on June 30. It aims to have $1.6 billion to $1.7 billion on hand at the end of the year, but that target presumes successful asset sales, patent income and improvements in the company's businesses.

The company has been trying to sell many of its thousands of patents.

"We're a large company, and we employ a number of outside consultants. We don't itemize who those consultants are or what they do for us," Kodak spokesman Gerard Meuchner told the Journal. "As we sit here today, the company has no intention of filing for bankruptcy."

Perez made his comment about bankruptcy this week at a town hall meeting broadcast to the company's employees.

 

Bond investors are less confident about bankruptcy prospects, trading Kodak debt at levels that indicate a high risk of default. One bond issue maturing in 2013 traded at 43.5 cents on the dollar today, down from about 76.3 cents on the dollar last week.

39Comments
Sep 30, 2011 3:48PM
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Kodak didn't really prepare that well for the digital age, and they are facing the same future that Poloroid is dealing with. Purplesky said it best "That is such bad luck after so many years of success and innovations."

Very True. I work retail for Best Buy, and when Digital Cameras started coming out, Canon, Nikon, Minolta, Samsung  started releasing Digital Cameras. Kodak and Poloroid where still selling Film. About 3 or 4 years ago Kodak started selling Digital Frames and Photo Printers, Ink and Paper. They didn't prepare, even after all of the leaps and bounds they made in photography.

Kodak could jump back to the Photo Forefront if they can create a product that is revolutionary to the photo world.  I, for one, hope they can do it.
Sep 30, 2011 4:02PM
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My father worked for Kodak for almost 40 years and he would tell me he saw the decline of this company coming. The CEO's and overpayed executives made no rational decisions for the company. They stopped caring about their employees a long time ago and only cared about lining their pockets. Don't these idiots realize they can't take it with them when they go. Kodak was a family friendly company in the 60's and 70's. Whitmore was the last good CEO they had and when Carp took over it all started going downhill
Sep 30, 2011 4:15PM
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And here I am with a new Kodak multi-function printer that just happens to be far better than the Canon and Epson I have had.

I would not worry about the CEO and the other senior management that drove the company into the black hole.
Did you notice how much CASH they have? Expect at least half to go to senior management and the rest to the lawyers.

You know, my wife and I just finished Christmas shopping. We decided this year to be huge before the final crash. We bought for our 4 grandchildren, daughter, son and son-in-law. We bought only sales, discounts, coupons at Macys, TJMaxx, Toy-R-Us, and eBay. @ kid has about 17 gifts, the daughter 3, the son 3, the son-in-law 3; my wife and I none. WE tried to buy ONLY American. The ONLY thing that was actually made in USA was the wine I bought my son-in-law. Not just China, Indonesia, Viet Nam (of all places), Japan, Hong Kong, Malaysia (Ralph Lauren). I guess we are doomed to be the consumers of the world on borrowed money from everybody else.
Sep 30, 2011 3:36PM
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That is such bad luck after so many years of success and innovations. 
Sep 30, 2011 4:08PM
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I live in Rochester and Kodak is no longer the "dominant employer" here. At one time if you lived here you worked for Kodak or Xerox. It's really too bad. Every day I look out my office window at the Kodak building waiting for the lights to go out. Three generations of my family have worked there but no more. Perez makes milions while Kodak goes down hill. It's not all his fault he was just brought there to usher the company into retirement.
Sep 30, 2011 5:31PM
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OMG. I have never seen so many people with entrenched political positions looking for any opportunity to rant.  Kodak's problems have nothing to do with unions, China, Obama, Washington, illegal aliens or men from Mars.  Kodak's problem is that their core business is as obsolete as buggy whips.  People don't use film in cameras any more and the company has never been able to successfully transition into another core line of manufacturing.  They are a film company in an age when film no longer matters.  Kodak meet Western Union, would you like to receive a telegram telling you when your film is developed?
Sep 30, 2011 4:45PM
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I've had 4 Easy Share cameras....loved each one of them.  They're great for novice camera users and I for one, hope the company can hang on.
Sep 30, 2011 4:35PM
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Kodak had some great products in the x-ray market and can still make the full digital turn but it will take getting rid of the old head management and overpaid consultant, trimming their product line and refocusing on cutting edge technology. And it will require hiring fresh new talent.
Sep 30, 2011 5:13PM
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I worked in a digital photo processing lab that used Kodak paper. Their product is very good. The demand is very bad. The traditional photo process is a thing of the past.  The article states they were the biggest supplier of "film" to the motion picture industry. You can develop a digital image using traditional processing. It's not so much the way pictures are taken, rather, the way they are developed that hurt Kodak the most. The next time you use a DIY photo kiosk, or use a printer at home, remember, that use to be a process that employed people using expensive chemicals/equipment.​ A photo and a picture from a printer are not the same. A true photo stems from the paper. It has layers of silver that make the chemicals work. Very expensive. I am neither for or against Kodak. Change happens. Anyone remember LP's, 45's, 8 tracks? This is another industry affected by advancing science/technology. Let's try and focus on the positive, rather than point fingers and blame.
Sep 30, 2011 4:54PM
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I worked for PanAm years ago,and it was thought they would never go out of business. Like IBM,Kodak sat on its laurels while smaller firms ploughed into new technologies and markets.

It is sad to see a firm with such a history fold,but they failed to keep up.

Sep 30, 2011 4:09PM
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Smart Capture is whats killing Kodak and they are not smart enough to know it.

 

Smart Capture (SC) is a feature on most Kodaks that cant be turned off and it is suppose to  improve the picture quality but it makes all Kodaks go thru a buffering  time that slows all their cameras down, its talked about and complained about on every camera forum yet Kodak does nothing about it,,,,, people dont like to buy slow cameras.

 

I own about 5 Kodak cameras and the picture quality is amazing on ALL of them, two of my Kodaks DONT have the smart capture feature and the picture quality is just as good with those cameras as the one that have the smart capture feature.

 

Kodak should listen to their customres more, if they did they might not be on the verge of bankruptcy.

 

 

 

 

 

 

Sep 30, 2011 4:39PM
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The problem is the shareholder. Years ago this company like many other American companies started shipping all the manufacturing offshore. So they could "remain" competitive. Now that they've done all that there's nobody here working to buy their product. The share prices are a fraction of what they were before all that. Doesn't look to me that it was worth sending the jobs away now does it? Shareholders were meant to invest in a company, not to be in it for a quick buck. Now everything gets sold off to make a fast dollar, instead of to generate a steady supply of income. What a shame.
Sep 30, 2011 4:11PM
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It's not bad luck...it's bad management.  But, then again, you won't find too many horse & bugy companies still around either.
Sep 30, 2011 4:42PM
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Well, actually Antonio Perez is not Mexican and he has been CEO for six years, which is not to say he is doing a good job. But their market has evaporated, which is the same market pursued by Fuji Photo. At one time the market was large enough (say, fifteen years ago) that Fuji built paper plants in the United States, in South Carolina. It isn't exactly competition from China that is hurting Kodak and it isn't the unions.

Sep 30, 2011 4:54PM
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@Shawn3179  Kodak does not now nor has ever had a union.  As much as I'd like to agree with you, this is not the unions' fault. (I am the daughter and grandaughter of former Kodak employees, a former Kodak summer employee and the spouse of a former Kodak worker)

Sep 30, 2011 4:49PM
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I purchaed a Kodak Digital Camera at Walmart after seeing the one purchased being used to photograph the Statue of Liberty. After talking to the couple and using their camera to take there picture, it was a great buy. I purchased the complete package Camera, Film, and Printer - Docking Station. It was just as the couple stated. My brother purchased a similar Kodak model following talking to a couple who had one. Excellant choice. Only to be told by Walmart that they no longer carry the printing paper, the film for the docking station, because Kodak wants to keep the item as Corporate only. Like automobile makers do. A vehicle is 10 years on the road and you should be able to buy after market parts, but the manufacture does not allow it. Dealer only! The same goes for the printers. Kodak has a great printer but you have to order ink or parts from the manufacture. Pay shipping costs which is sometimes higher than the price of the ink. Kodak makes a great camer but has shoddy customer relations. Once a person gets bit by added costs and lack of availability, then they quit buying the product. Bankruptcy occurs. Kodak want to get back in the Market, provide customer service, customer relation, service what you sell. Make available the ink/cartridges at after market places like. If I cannot buy the ink or the film for the camera I stop buying your product.
Sep 30, 2011 4:38PM
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Yes it is what it is, but it doesn't mean that it isn't a shame.  I used to live in western NY and getting a job at Kodak was near impossible in the late 60's and early 70's.  My buddy snagged one and he was living large.

 

Another toll of the bell for western NY.

Oct 1, 2011 5:31PM
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Just an example of the problems with Corporate America. At Kodak the "Kodak Executive Protection Plan" is a 32 page documents that details allthe "severence pays and benefits" that the upper three "tiers" of Kodak Management will recieve in the event they are laid off, hostile take over, bankruptcy, etc.  On the other hand the "Kodak Employee Protection Plan" (for the regular employees) is just three paragraphs in the Employee Benefits Newsletter. 

Sep 30, 2011 5:46PM
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My father and I worked at Kodak Research for a combined 68 years and watched a great company head toward the end of the tracks like a runaway train. Well we are finally at the

end with no sign of slowing down.....I would be suprised if they last more than a couple

more years while they spend money like a drunken sailor on shore leave.......Like a

dinosaur they should accept extinction and die quietly.

Sep 30, 2011 4:05PM
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i hope they do also jerry...maybe you can get a job there when best buy closes.
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