Here's a paragraph from today's WSJ that neatly captures some of the themes I've been exploring about technology's impact on business models, corporate life-cycles and investment horizons."Kodak spent $3.4 billion from 2004 through 2007 converting the bulk of its 129-year-old business from high-margin film to more competitive electronic technology. It is in the midst of cutting 3,500 to 4,500 jobs, which could reduce its work force to a 1930s-era low of 19,900 from a 1988 peak of 145,300."
It's worth noting that the enterprise value (equity value plus net debt) of EK is a little under a billion dollars today (at roughly $3.00 per share.) Including pension liabilities of $2.4 billion in the net debt calculation increases the enterprise value to roughly $3.4 billion, equal to the amount Kodak invested over four years to convert from a film-based to an electronic imaging company.
Under the most generous interpretation, the market is valuing Kodak's 129-year history at zero right now, despite it's highly recognized brand and long tradition of technological innovation.
The market may be right. I am a little bit older than you Bob but when I think of Kodak, I think of cheap plastic cameras. I do not think of them as a "high-tech" company because of the junk they produced.
ReplyDeleteRichard - Thanks for commenting. I agree with your assessment of Kodak cameras... have they had a hit since the Brownie?
ReplyDeleteBut they must've been pretty darn good at chemistry and process engineering to sustain their leadership in film technology.
The over-arching problem seems to be that those skill sets don't obviously transfer over to computer memories and displays or internet photo-sharing sites, which seem to be the preferred way of storing, displaying and sharing photographs in the digital era.
""Film will never come back," Mr. Perez said. "Those very, very, very high gross margins that film had will never come back. I don't know of any digital businesses that will even have half of the margin that film had." - EK CEO, Antonio Perez on June 25, 2010
ReplyDeleteKodak Chief Perez Plans to Curtail Patent Lawsuits