Past Five Years Kodak example essay topic

At your request, I have compiled information on Eastman Kodak Co., so that you may come to an investment decision. The report will consider the company's background (including Kodak's areas of production), a past obstacle Kodak has had to face and overcome, and a financial snapshot of Kodak over the past five years. BACKGROUND Originally founded in 1880 by George Eastman, the Eastman Kodak company now stands as a leader in the info imaging industry. Infoimaging is a $385 billion industry that consists of using traditional and digital film to allow people to capture and deliver images through cameras, computers, and the media. Currently under the direction of Chairman and CEO Daniel A. Carp, Eastman Kodak is divided into three major areas of production. 1.

Kodak's Digital and Film Imaging Systems section produces digital and traditional film cameras for consumers, professional photographers, and the entertainment industry. This segment accounts for 69% of revenues earned by Kodak in 2003.2. Health Imaging caters to the health care market by creating health imaging products such as medical films, chemicals, and processing equipment. Health Imaging also places emphasis on radiology for dental, mammography, and oncology markets. Health Imaging accounts for 18% of revenues earned by Kodak in 2003.3.

The Commercial Imaging group produces aerial, industrial, graphic, and micro graphic films, ink jet printers, scanners, and digital printing equipment to target commercial and industrial printing, banking, and insurance markets. Commercial Imaging accounts for 12% of revenues earned in 2003. Since the formation of Kodak, the company has remained the world's leading film provider with virtually no competitors. That is until the arrival of Fuji Photo Film, which now surpasses Kodak in earnings per share and is viewed as the industries number two. OBSTACLE While Eastman Kodak has remained an industry leader in the sales of film for photo-imaging, over the past five years Kodak has underestimated the demand for digital cameras.

Digital cameras require no film whatsoever and with Kodak's main line of production being film Kodak has suffered great losses in net profit. Just in 2004 Camera film sales have been falling even than projected. The Photo Marketing Association predicted a six percent drop in film sales and Kodak projected an even more dismal 10-12 percent drop in film sales. The actual drop in sales reached an unforeseen 18%. In 2003 digital camera sales were greater than traditional film camera sales for the first time. To account for their miscalculation in film sales, Kodak is undergoing a massive digitally based shift.

Kodak plans on building a stronger base in its consumer, medical, and profession imaging products. However, this shift does not come without a price tag. Kodak's projected spending could reach as much as $3 billion in future investments to aid the shift. With these investments Kodak claims a tremendous turnaround in revenue. Kodak anticipates reaching $16 billion in revenue by 2006 and $20 billion by 2010. To pay for the $3 billion in investments however Kodak has been slashing jobs rapidly.

Kodak has cut over 22,000 jobs over the past five years and plans on further reduction. Jobs are not the only expense to be cut. Kodak has suggested to its board of directors to cuts dividends by 72%, thereby reducing the current semi-annual dividend of $0.90 per share to $0.25 per share. While Kodak has plans to overcome the drop in film sales, they have many financial obstacles to overcome. FINANCIAL SNAPSHOT In looking at the financial snapshot of Eastman Kodak, the past five years reflect a consistent drop in the price per share. As the graph illustrates the stock market price is over 60% less than its valuation in June, 1999.

Also included in the graph is the performance of Fuji Photo film, Kodak's largest competitor. Fuji, who also relies on film for revenues, reflects only a 20% drop in value over the past five years. That is nearly 1/3 of the loss that Kodak sustained over the past five years. In September, 2003 the graph reflects Kodak's lowest price per share in well over ten years. Underneath the graph is a display of the volume of shares issued and outstanding. Despite the rapid increase in volume in September, 2003, the number of shares issued and outstanding in June, 2004 are less than they were five years ago.