Tuesday, February 14, 2006

Eastman Kodak - Sinking or Surviving?
In the last five years one of the most venerated names in business was blindsided by disruptive technology - Eastman Kodak (NYSE : EK), the erstwhile king of photography will lose more than $1B in 2006. A simple comparison of Kodak versus Canon's stock tells it all.

Canon, Nikon and Sony jumped on the digital photography trend while Kodak completely missed the boat on this one believing they would ride out the storm selling film and throw away cameras - tough luck! The end result has been bloody 20,000 plus jobs lost in upstate New York and about $20billion wiped out in market cap. Needless to say Kodak has woken up the question is - Is it too late and too little. Kodak has been rapidly moved to becoming a digital company.
- Painful restructuring has stemmed losses.
- Kodak digital cameras were the largest sellers by volume in the US in 2005 (I was surprised to learn of this).
- Kodak has been cranking its innovation juices lately - In 2004 it was the first company to introduce the WiFi enabled digital camera and in 2005 it was the first to introduce a dual lens digital camera.
-Kodak has recently entered into an agreement with Motorola for developing sensors for cell phones.
- Kodak has a phenomenal intellectual property portfolio in CMOS sensors, indeed it has joined forces with Texas Instruments recently.

All this means Kodak may be the value play/turnaround of the decade Or EK may join the ranks of its cousin "Polaroid" in bankruptcy court. I believe Kodak should further its transition to a digital company by buying Lexmark (NYSE:LXK) and OmniVision Technologies (Nasdaq:OVTI) - A stock recommended on this blog that is up 60% since then.

As an investor willing to bet on a turnaround EK currently trading at $24.90 might be a good buy although personally I would be a buyer at anything less than $24 at these valuations. Will keep you posted.


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