Article - 3 Kodak - MANAGEMENT Kodak Struggles to Find Its...

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MANAGEMENT
• AUGUST 11, 2011
Kodak Struggles to Find Its Moment
By DANA MATTIOLI , JOANN S. LUBLIN and ELLEN BYRON
ROCHESTER, N.Y—After three decades of serial reorganizations, Eastman Kodak Co. is
struggling to stay in the picture.
The 131-year-old company lost much of its film business to foreign competitors, then
mishandled the transition to digital cameras. Now it is quickly burning through its cash as it
remakes itself into a company that sells printers and ink.
On July 26, Kodak reported its fifth consecutive quarter of losses. The company's junk-rated debt
coming due in two years has moved below 80 cents on the dollar, signaling the market sees a risk
of default. The company's already battered stock has taken an especially tough pounding in
recent days, falling 10% Wednesday to $1.77. Prior to this week, Kodak hadn't closed below $2
since the 1950s, according to the Center for Research in Security Prices at the University of
Chicago.
Kodak had been raising money by suing companies for its portfolio of patents, including its
image-preview patent. But the flow of settlements dried up this year, prompting Kodak last
month to seek offers on some the patents themselves
,
a person familiar with the matter said.
In a sign of how far Kodak has fallen, analysts believe the patent portfolio is worth more than the
company's stock-market value, which has fallen below $500 million.
After the company got a call from a banker late last month describing a private-equity firm's
interest in buying a large stake in the company, Chief Executive Antonio Perez quickly
assembled the board for a weekend conference call to approve a measure that would deter a
hostile takeover, a person familiar with the matter said. Kodak announced a poison pill Aug. 1
that allows shareholders to buy stock at a discount if an outside investor acquires a big stake.

Kodak has struggled to revamp to make the move from their heritage product, film, to ink and
printing technology, but the company has now resorted to selling off its patent portfolio, WSJ's
Dana Mattioli reports. (Photo: AP Photo.)
Some former executives say the company probably should have broken itself up and sold off the
parts. Mr. Perez rejects that notion, and it would be complicated by the company's pension
obligations. The board may be more flexible than its CEO, however. Rick Braddock, Kodak's
presiding independent director, said a breakup doesn't make sense given the company's
commitment to a turnaround. But he added, "I am not going to rule anything out."
Mr. Perez said he remains confident in the company's transition plan. He said the company will
end the year with at least $1.6 billion in cash, up from $957 million now, because he expects
intellectual property revenue, asset disposals—potentially including the patents—and sales to
pick up in the second half.