Eastman Kodak’s business has been in decline for a long time. Share prices peaked in the mid ‘90s and have generally been in decline since. The consumer transition away from traditional film to digital products was too overwhelming for management to deal with effectively, and probably would have been even if they read the tea leaves perfectly. However, it is no secret today that film has been in a long and permanent decline, to the market or to management. And management has been taking steps for the last decade to right-size and reorient the company, resulting in employment decline from 74,000 in 2001 to 20,400 employees today. This has been accompanied by sustained restructuring charges in the range of $600-700 million every year. If Kodak continues restructuring at this rate, they will have no employees left in three years, creating a fundamental catalyst for restructuring charges to end or at least be greatly diminished in the future.
If we try to think about Kodak moving forward, we can finally bring into focus the effects of the changes made over the past decade. By excluding the restructuring, impairment, and excessive depreciation charges that absolutely cannot continue (assets have been almost fully depreciated as well), and making some conservative estimates for the cost reduction benefits of recent restructuring efforts, we find that Kodak presents an attractive investment opportunity despite a continuing decline in demand for traditional film products.
You can read my full report @ http://harbor.typepad.com/analysis/eastman-kodak/
