December 6, 2011
I follow news about Eastman Kodak closely. In Rochester, who doesn't? But over the last few months what I have heard seems to define two very different companies.
It's was late September when Kodak hired Jones Day, a law firm with a specialty in restructuring, (that's just another word for "can't pay your bills"), and the news caused the stock to hit its lowest level since 1935. Since then there has been a whirlwind of news: credit ratings downgrade, drawdown of credit lines, talk of "rescue" financing, sale of the image sensor business for "undisclosed" terms (translation: "not much"), Kodak Gallery put up for sale, another quarterly operating loss. Last night The Wall Street Journal reported that Kodak has replaced Jones Day with top-tier NYC law firm Sullivan & Cromwell. All this news paints a picture that for even a casual observer could only be described as grim.
But about that other Kodak: one source seems to have nothing but good news. I'm referring here to CEO Antonio Perez. In classic corporate cadence, he described inkjets as a "gorgeous business" for Kodak, and in July he projected that by 2012 Kodak would be a "profitable, sustainable digital company." This leaves me scratching my head. Is Kodak on the cusp of sustainable profitability, or is it a walking corpse?
We're getting closer to finding out. Last's nights report of the Sullivan & Cromwell hiring is a meaningful development that raises more questions. Sullivan is one of the biggest name law firms in New York, and advises on high profile bankruptcies among other things. One of their senior lawyers was at the eye of the storm during the financial crisis. But Jones Day is also a top shelf firm. What couldn't they do that Sullivan can? What will it be: Door #1, bankruptcy and the end of Kodak? Could Door#2 be the long-awaited sale of patents for big money that leads to the digital future? Or will Door #3 be both: a sale of patents inside bankruptcy court, with debts paid and Kodak allowed to struggle into whatever future it has left.
Seems like we'll know fairly soon.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).