Mini Case Study - Kodak - 2011

Mini Case Study - Kodak - 2011 - the profitability of...

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1 “Mini” Case Study Kodak – Expand or Pay Dividends
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2 What to do? Kodak at a fork in the road in 2003 One strategy: Keep traditional business, milk it for what it’s worth, but no new investments, maybe boost dividend (already one of largest dividend yields) Another strategy: Change business model, branch out to digital imaging, start to compete with Hewlett Packard and Lexmark and Canon (problem: need more cash)
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3 Kodak – Background Move to digital cameras a big problem for Kodak CFO estimates declines in earnings from traditional film business from 1998 through 2006 will total a “breathtaking” $1.8 billion Citing concerns about the “declining prospects” of Kodak’s traditional business, and “doubts” about
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Unformatted text preview: the profitability of digital imaging, S&P downgraded Kodak debt to BBB- (one notch above junk status) 4 What did Kodak Decide? 9/25/03, Kodak announces will cut semi-annual dividend to 25 cents from 90 cents (72% decline), dividend cut will give the company an extra $1.3B in cash to work with through 2006 Also, in early October of 2003, Kodak raises $1B via a debt offering 5 How Did Market Respond? Stock price falls 18% the day of the dividend-cut announcement! Some institutional investors met shortly after the dividend cut to try and force Kodak management to change its mind. What has happened since then? 6...
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This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

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Mini Case Study - Kodak - 2011 - the profitability of...

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