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.
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.
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.
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.
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.
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.
@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)
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.
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.
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.
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