Death of a Once Formidable Company

Eastman Kodak (NYSE: EK  ) is apparently standing near the corporate equivalent of death's doorstep. It recently hired Jones Day, a law firm that specializes in restructuring, leading to speculation that the storied photography giant may itself file for bankruptcy.

It's an unfortunate endgame for a company that was destroyed in large part by the digital photography revolution it actually pioneered. But it also serves as a harsh reminder that the rule of the corporate jungle remains "adapt or die."

What once was
Kodak was no slouch of a company. It has a longer than 130-year history, and it was an American exporter as far back as 1889. At one time it was so formidable, well-known, and respected, that it was a member of the Dow Jones Industrial Average (INDEX: ^DJI) , an elite group of companies whose shares are often used as a proxy for the health of the overall economy.

Yet today, the photography giant is "exploring strategic alternatives" and could declare that rumored bankruptcy, should its other alternatives (like a breakup or a sale of its patent portfolio) fail.

Kodak isn't alone
The Kodak story, while tragic, isn't unique among even the companies that make up the Dow Industrials. In fact, of the original 12 stocks in that index, only General Electric (NYSE: GE  ) remains there today, and even that giant stumbled hard during the recent financial meltdown. Other recent spectacular crashes among the Dow titans include General Motors (NYSE: GM  ) , whose own 2009 bankruptcy got it kicked out of the index.

Indeed, if anything, the "adapt or die" rule may actually be accelerating in today's digital and global era.

It wasn't that long ago that Sun Microsystems was at the forefront of the Internet. Nearly 70% of the early Internet applications were written on its hardware, an amazingly high market share. Yet today, after several years of stumbling on its own, Sun survives only as part of Oracle (Nasdaq: ORCL  ) , following a 2010 acquisition.

And let's not forget that today's giant of the Internet, search king Google (Nasdaq: GOOG  ) , was itself a "Johnny come lately", founded in 1998. That was three years after its former competitor AltaVista got off the ground, nearly an eternity in "Internet years." Yet today, AltaVista searches are likely actually powered by Microsoft's (Nasdaq: MSFT  ) Bing, an ironic fate for that Internet pioneer.

Speaking of Google and Microsoft, that particular war isn't anywhere near settled. Bing, after all, is essentially Microsoft's attempt to fight Google on Google's home turf of search. And Google isn't playing purely defense either, choosing to go after Microsoft's Office and Windows franchises with its Docs and Chromebooks, respectively.

There may very well be room on the Internet for both companies. That said, the one thing that'll likely come true is that if one of them rests on its laurels, that will be the one that falls farthest and fastest.

What this means to investors
Whether it was Kodak inventing digital photography, Sun's early pioneering on the Internet, or AltaVista's search engine, just because you have the lead today doesn't mean you'll have it tomorrow. Any company that wants to last needs to innovate just to maintain its current position, much less continue to grow its business over time.

As an investor, it means that you must remain ever vigilant with the companies you own, always on the watch for what might come around to disrupt your company's operations. When (not if) that disruption happens, watching how your company responds will speak volumes for its long-term staying power and worthiness to remain in your portfolio.

Disruptive change will happen. The companies that successfully adapt may very well come out stronger, but the ones that don't will almost certainly die. That's even true of companies like Kodak that were once so well-known and respected to appear in the Dow Jones Industrial Average.

At the time of publication, Fool contributor Chuck Saletta owned shares of General Electric and Microsoft. Click here to see his holdings and a short bio.

The Motley Fool owns shares of Microsoft, Google, and Oracle. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, and General Motors. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (24)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 03, 2011, at 2:14 PM, JeanDavid wrote:

    Oh! No! Who is going to get the photographic film part of the company? I need a souce of supply of TMax 100 and TMax 400 film in 4"x5" sheet film sizes. And I prefer to use thir Xtol film developer. There are still companies that make photo film, but none I have found that are as good. I lament their discontinuance of Elite Fine Art photographic paper. No one seems to make a satisfactory substitute.

    This is another case of exporting jobs. I will have to buy film from a photographic specialty manufacturer in England, from whom I already get photographic paper (that I do not even like as well as the former Kodak paper).

  • Report this Comment On October 03, 2011, at 3:03 PM, kdt34wqx wrote:

    Guess what? GE is next in line. GE was destroyed by arrogant managers who thought they were smarter than everyone else. They aren't. In fact the truth is just the opposite. What is GE's exposure to European banks? A whole bunch, I'm sure.

  • Report this Comment On October 03, 2011, at 3:34 PM, Dabolts101 wrote:

    Funny this article didn`t even mention that THE COMPANY SAID today THEY ARE NOT FILING FOR BK. David must have went short. Incredible Motley Fool gets away with this garbage.

  • Report this Comment On October 03, 2011, at 6:42 PM, TMFBigFrog wrote:

    Hi Dabolts101,

    You can find David (Gardner)'s stock positions here: http://my.fool.com/profile/TMFSpiffyPop/info.aspx . I don't see Kodak listed there.

    As for whether or not Kodak will file bankruptcy, this article: ( http://www.bloomberg.com/news/2011-10-03/eastman-kodak-rises... ) says the following:

    "Kodak ... is weighing options including a bankruptcy filing because of concerns raised by possible buyers of its patent portfolio, said three people with direct knowledge of the process."

    Note that the same article also acknowledges Kodak's statement that it has no intention of filing for bankruptcy.

    Regards,

    -Chuck

    Inside Value Home Fool

  • Report this Comment On October 03, 2011, at 9:44 PM, Clint35 wrote:

    @ Dabolts 101, it doesn't matter what a company says it matters what it does. Less than a month ago BAC's CEO said they didn't need to raise additional capital and that investors shouldn't worry. Ever since then they've been selling off assets like crazy.

  • Report this Comment On October 04, 2011, at 9:07 AM, kdt34wqx wrote:

    Kodak can sell all the patents they want. They aren't worth much. Certainly not enough to save the company.

  • Report this Comment On October 09, 2011, at 3:21 PM, vaderblue wrote:

    Kodak is not filing bankruptcy.

  • Report this Comment On December 09, 2011, at 1:11 PM, ineptceos wrote:

    Perez not only is bringing down Kodak, he already brought down Qualix,Inc. Durham, NC. I believe it's intentional on his part. He takes his multimillion dollar

    bonus every year and it seems it goes unnoticed by the ones that could have sent him walking many years ago. It's shameful that a once great iconic company was taken down by a single person while he made millions. I'm very sad about it.

  • Report this Comment On December 16, 2011, at 5:26 PM, neckbone2251 wrote:

    Due to kodak Having borrowed 1bil. from the liquidation firm that now has a member on kodak's board, KodAK CANNOT LEGALLY THROW THE ANCHOR !

    A total waste of great employe's efforts to save what was once a great company ! That is what happen's when you invest in management that has no idea what those in the field do ! The fat cats just live off the hard work of individuals that payed their salary and whatever else they wanted, just to be cast in the ditch when the fat cats start to see their perks dry up !

  • Report this Comment On January 19, 2012, at 10:00 PM, TMFBigFrog wrote:

    And Kodak has now filed for bankruptcy...

    -Chuck

    Inside Value Home Fool

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