Is Kodak Lost Into Oblivion?
Founded by George Eastman in 1888, Kodak no longer enjoys the grand status it once did. In 1967 Kodak enjoyed a market capitalization of $177 billion and was the second largest company in the US. Kodak employed as many as 145,000 employees around the globe. However, those days are long gone. Kodak declared bankruptcy in 2012 and in 2015 reemerged as a leaner company after shedding most of its debt in bankruptcy court. Today, Kodak is again trading at all-time lows of $2.50 per share. So the question is if Kodak can still manage to restructure themselves and successfully emerge from the brink of death yet again?
While Kodak was able to earn a positive Net Income in its last fiscal year, the company has not been able to re-establish itself and don’t have stabilized cash flows as of now. The company incurred a large amount of restructuring, financing and legal fees which prevent it from becoming liquid. As a result, the only choice left with Kodak is to evaluate its many divisions and sell the ones that are not doing well and have low potential for growth. Just a few days ago, Kodak finalized the sale of its “Flexographic Photography Division” to Montagu Equity for about $320 million. Jim Continenza’s, Kodak’s new CEO, has a strategy to cut costs and improve financial stability. However, the sale price is much lower than the previously announced price of potentially closer to $400 million, and the CEO who had the reins for the last few years has just stepped down.
Following this sale, Kodak is trying to liquidate it’s position from its photography division and is leveraging the small growth divisions to gain stability. Kodak has struggled to find its standing in the photography division ever since it declared bankruptcy. As a strategic move, they are focusing more and adding more value to their printing division, film division and other sectors. The printing and film divisions bring Kodak it’s maximum revenue and have great potential for growth. WIth Kodak bringing back its old film products like Ektachrome and SONARA and with it spending a huge amount on brand awareness, Kodak is definitely drawing some attention from investors.
However, the facts still remain that Kodak has been incurring constant losses for several years now. They have suffered negative revenue growth, negative EBITDA growth and even negative cash flows for the current year. If Kodak continues to maintain this level of poor operational efficiency, then it Kodak will find itself in a similar situation like 2012. Their only chance to survive is to focus on its strengths which are it’s printing and the film divisions and completely shed off its photography division. However, even if Kodak manages to do all of this, I don’t think that they can regain their status of being a tech giant again.
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Written by Madhav Gupta & Edited by Alexander Fleiss