Eastman Kodak stock took a big hit on Monday after the company unexpectedly borrowed $160 million in cash, spooking investors. The stock lost nearly a quarter of its value, bringing its decline for the year to a dispiriting 70%.
Kodak officials downplayed the importance of the loan, saying its concern is to minimize taxes from overseas earnings and manage the seasonal nature of its cash flow.
The first known digital camera was invented by Steven Sasson at Kodak in 1975, using the charge-coupled device (CCD) developed by Willard Boyle and George E. Smith at AT&T Bell Labs in 1969. Kodak developed many digital technologies and still sees significant earnings from its patents, but has so far not been able to move away from its traditional core business quickly enough to manage a transition. Kodak announced in July that it would sell part of its $2 billion patent portfolio to raise funds.
In an article yesterday in the New York Times, a stock analyst says the company's tapping of its credit line "Just shows that the core business continues to burn cash," and another told Reuters that the company could file for bankruptcy "between now and 2012." Kodak stock is $1.84 this morning, up slightly since Monday's 38-year low.
(Thanks to Alexey Merz)
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Original contents copyright 2011 by Michael C. Johnston and/or the bylined author. All Rights Reserved.
Featured Comment by 12-east unwinder building 29: As someone who was born and raised in the Rochester N.Y. area, son of a 20-year Kodak man, and who worked two college summers there, I can't say I'm surprised. Kodak Park (excuse, please: 'Eastman Business Park') is a sad shell of its former self; many of the buildings there have been outright demolished.
"Funny/sad story about those demolitions, by the way. They were public events, and heavily covered by local news. They would interview some 30-year Kodak veteran who had spent their working life in the building they were imploding. The Kodaker was getting teary-eyed over the memories. Then cut to the Kodak PR person jumping up and down at the site, screaming about blowing up the competition with their new printers. Then cut back to misty eyed Kodakers. I've often felt that Kodak's marketers and PR people were the company's worst enemies."
Featured Comment by Dennis Huteson: "I know full well what they used to do, but what do Kodak do nowadays?"
Featured Comment by erlik: "Huh. So the change of the business model IBM advised is not working.... Which doesn't really surprise me when I think of it.
"It's one thing to sell off your consumer hardware business while the selling was good and retreat into the remaining lucrative business of IT services and enterprise hardware.
"It's completely another to try and change your business model when photography is all of your business. Where can Kodak retreat? They divested of their camera business. Can they become solely an OEM, no-name sensor supplier for cellphone manufacturers? Or a boutique film and paper manufacturer á la Efke?"
Featured Comment by Robert Meier: "I found out yesterday that Kodak no longer makes its Rapid Fixer, a staple of my darkroom for decades. Fortunately Ilford makes a similar rapid fixer, and, it turns out, even though it is made in Germany and shipped over here, it is cheaper.
"When Kodak stopped making B&W enlarging papers a couple of years ago, they just shut it down, rather than selling the division to someone else. I hope when the day comes that they decide that don't want to make B&W film any more, they will have the decency to sell the right to make it to someone who will. Freestyle, maybe?"
Featured Comment by Geoff Wittig: "Many of my patients are former Kodak employees, one of them a retired digital engineer, and they tell a depressingly constant tale. The company made such consistently high profit margins on their core business of consumer print film and paper that management had no interest in developing future product lines that didn't promise the same cushy margins. Kodak developed numerous brilliant digital technologies, then either let them languish or sold them for pennies on the dollar to other companies with smarter management. Yes, the market for inkjet printers/inks/papers is far more competitive with much lower margins than Kodacolor commanded...but today it's still a live market! The same goes for digicams, digital minilabs, digital medical imaging and on and on. Kodak pioneered the technology, then dithered on developing it until others took over the market. For the last five years the company has been amputating limbs and selling kidneys to keep the lights on a little longer, but they're running out of parts to sell.
"I can see Kodak's headquarters tower every time I drive into the city, but it's quickly becoming a depressing monument to collapse, like the Pan Am or Chrysler buildings in New York City."