Kodak’s Critical Moment

By Rex Moore
October 22, 2003


This is turning out be one of the most memorable days in the 122-year history of Eastman Kodak (NYSE: EK). The floundering photo giant — trying to develop a clear focus and strategy — is being pulled in different directions by those with a financial interest in its well-being.

To begin with, the company this morning reported third-quarter earnings from continuing operations of $0.88 per share, down 19% from the same period last year. Revenue, excluding the favorable impact of foreign currency exchange, fell 1%.

But another in a long line of disappointing quarters is only part of the news. Today, a group of disgruntled shareholders is meeting in New York to discuss ways to nudge Kodak away from its plan to realign the company around digital technology. The group, led by the Providence Capital investment firm, reportedly is comprised of about 60 institutional investors owning 25% of the stock.

Kodak recently slashed its dividend for the first time ever in order to help finance the shift from its core film business to digital imaging. But the digital market is highly competitive, and the group is not convinced Kodak can compete effectively as a latecomer.

Meanwhile, some photo retailers are offering up a different point of view. Mitch Goldstone, owner of Irvine, Calif.-based 30 Minute Photos Etc., is urging Kodak “not to be distracted from its strategy and vision for expanding its reach towards digital imaging.” The developer of the Teacup Index says the new print-at-retail photo kiosks and online services “will make my business bigger, [and] it will also translate into rewarding growth for Kodak as well.”

If my experience with a Kodak digital camera is any indication, the company is still struggling with its new focus: I’ve had a tech support issue go unanswered for nearly a month, even though an automated email promised I would “be receiving a personalized response from the Kodak Support Team within 24 hours.”

This is clearly a critical period for the company as it tries to please the different factions of shareholders, retailers, and customers.

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