Through TheFLY's Eyes: Eastman Kodak Company
from Theflyonthewall.com












West Coast Meets East Coast

The gauntlet has dropped. The “end of the 19th century economies-of-scale model that has worked so well for the last 100 years” is over at Eastman Kodak (EK). Antonio Perez is bringing the west-coast, high-tech mentality to this old-economy company. Perez comes to Eastman Kodak from Hewlett Packard, where he was responsible for the hugely profitable printer business.

Since assuming the CEO title, Perez has moved quickly to make changes in the manufacturing structure. Now he is targeting the large corporate structure that needs to be changed to face the new realities that exist today. The turnaround has a long way to go, here are some points to focus on to measure the company’s success:

Turn Around Points To Focus On:

* Eastman Kodak will become more and more a digital company, which means being a lot more seasonal and cyclical. Earnings will come in the 3rd and 4th quarters. Also, the company will be affected more by volatile product cycles
* Ability to handle big seasonal swings in inventories
* 2006 will be the peak restructuring year
* Sometime during 2007 the restructuring should decelerate and improvements seen
* Impact by high commodity prices
* Strong cash generation in 2nd half of year
* Implementation of strategies regarding the heath business—sale or restructuring

Eastman Kodak has a lot of headwinds: currency, taxes, commodity prices, product transition, ability to manage inventories, exiting underperforming businesses and acquiring new businesses. Investing in Eastman Kodak is a bet on Antonio Perez. If Perez doesn’t succeed, Eastman Kodak might go the way of the buggy whip. Investors have time to evaluate this one.