Why 2011 Crushed Eastman Kodak

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Eastman Kodak (NYSE: EK  ) . Everyone knows the iconic company that brought cameras and film to the masses in decades past. But lately, Kodak simply hasn't kept up with the pace of technological innovation in photography. In response, the company's shares have crashed, and many investors see no future for Kodak.

Stats on Eastman Kodak

Year-to-Date Stock Return (83.3%)
Market Cap $239.1 million
Revenue, Trailing 12 Months $6.23 billion
1-Year Revenue Growth (20.2%)
1-Year Profit Growth NM (loss of $1.24 billion over past 12 months)
CAPS Rating (out of 5) *

Source: S&P Capital IQ. NM = not meaningful.

What happened to Kodak this year?
Kodak has gone from a giant to a fading star, with the market capitalization of a small-cap company. With a history that goes back to the 19th century, Kodak's biggest news of the year came in late September, when reports surfaced that it hired Jones Day, a law firm that specializes in restructuring. The move followed an announcement earlier in the year in which the company said it was "exploring strategic alternatives" for its digital imaging patent portfolios. Some analysts saw the moves as a possible precursor to a sale, breakup, or bankruptcy filing.

But as a leader in film and film-based cameras, Kodak steadily fell behind the times as digital photography took off and companies like Hewlett-Packard (NYSE: HPQ  ) and Sony (NYSE: SNE  ) built up their reputations in the space. The irony here is that Kodak is credited with inventing the first digital camera in the 1970s, and it still has an extensive array of patents related to digital technology. In fact, those patents are what's giving Kodak shares most of their value today.

Now, the company seems to be making the most of those last crown jewels. It licensed some of its cinematic laser projection patents to IMAX (NYSE: IMAX  ) back in October, and lawsuits against Apple (Nasdaq: AAPL  ) and Research In Motion (Nasdaq: RIMM  ) could give Kodak an estimated $1 billion in royalty payments.

Perhaps the biggest problem for Eastman Kodak is that investors have little confidence in the company. Although it has ample cash, the company is drawing down lines of credit. Whatever the future brings, 2011 hasn't been kind to Eastman Kodak, and in fact, it appears as if it might be the end of a long era for the former photo giant.

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Editor's note: A previous version of this article mischaracterized the content of Kodak's announcement. The Fool regrets the error.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of IMAX and Apple, as well as creating a bull call spread position in Apple. 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 Fool has a disclosure policy.


Read/Post Comments (28) | Recommend This Article (6)

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 December 12, 2011, at 12:27 PM, Mikey925 wrote:

    You don't seem to fully understand that Kodak is a leader in commercial digital printing, which is now finally rolled out this year. If they have a decent Xmas sales season, and then shed some of the lame consumer businesses such as ink jet printing and cameras, they can become extremely profitable in 2012; the digital imaging patent sale not withstanding.

  • Report this Comment On December 12, 2011, at 12:35 PM, Mikey925 wrote:

    http://www.printweek.com/news/1108573/Kodak-showcases-digita...

    Digital printing is THE growth engine for Kodak.

    Only about 1% of today's total print production is being done digitally. This is a huge market place, which Kodak technology can easily penetrate.

    Most of the Bears on EK are totally ignorant of this.

  • Report this Comment On December 12, 2011, at 12:53 PM, jerr1 wrote:

    12 days before big pay out long awaited for patent kodak finally

  • Report this Comment On December 12, 2011, at 1:39 PM, prosperpress wrote:

    The problem with the fools claiming to know the print market is that Kodak do not have any significant share in hs area. Digital print isTotally dominated by Xerox and HP. The Prosper colour press is not yet working despite pr claims to the contrary, and how many do they need to sell to stem losses of 222 mill per quarter? Its time to shut up shop and return whatever value there is left to the shareholders and stop squandering it on the last hurrah of Antonio Perez.

  • Report this Comment On December 12, 2011, at 2:49 PM, trysson wrote:

    Of the top executives at EK, five of them have over 100 years of service with HPQ. Three of these 5 executives are the top 3 executives at EK. Given the fact that HPQ & EK went into a joint venture together it is understandable that there was an exchange of talent. It appears that EK and its stockholders are being manipulated by some group that may very well want to take over the company. It may be HPQ, or some group of executives, or some other group, but it is obvious that EK is over sold, and it should be clear to onlookers that EK has a future for its product line.

  • Report this Comment On December 12, 2011, at 8:50 PM, jerr1 wrote:

    Kodak stock diffently being controled , the sudden drop in stock price with no news other then patent dispute date december 30.Someone with intrest in this patent may or may not influeancing stock price of kodak. Wont be first time company was driven into bankrupy by out side company or person especailly when billion dallors is at stake.

  • Report this Comment On December 13, 2011, at 7:15 AM, trysson wrote:

    If one questions the companies that are using PROSPER 5000, one does not find arguements against the product. I saw it in operation and it certainly seems to work well. Read recent news about the 5000 & the 1000.

  • Report this Comment On December 13, 2011, at 9:13 AM, prginww wrote:

    As an employee of Kodak for over 20 years - if we the employees thought Kodak would be able to turn the ship around - we would be fools not to buy up the stock at it's current price - however there are few employees that believe Kodak will survive. We just wait for our pink slips. Agreed, the Prosper Press has a good future - but Prosper cannot save the company - film, cameras, AIO printers - just a losing battle there.

    Kodak's CEO and Upper Management (most from HP) have done exactly what HP wanted them to do.

  • Report this Comment On December 13, 2011, at 11:28 AM, prginww wrote:

    Kodak still thinks 4th quarter will be a good quarter. However, I haven't seen many adds for Kodak cameras and printers in the newspapers? When I visit the stores I haven't seen anyone buying a Kodak AIO printer nor a Kodak camera?

    Most young kids want SMART phones not a Kodak camera. Prosper could survive if Kodak spends off that division - otherwise the Kotanic will simply sink.

  • Report this Comment On December 13, 2011, at 11:34 AM, prginww wrote:

    Only way for the stock to go up is for CEO Perez to step down. Everyone has lost all faith in him and no one believes a word that he says. Therefore, as long as Kodak keeps CEO Perez in charge - the public, consumers, investors, media, etc. - will simply watch the fall of the Kodak Empire. To most, Perez is a joke - and the fact the Board of Directors have kept him - shows that the Board of Directors are simply as bad as Perez. Perez, by not getting the TOP spot at HP - is determined at all cost to prove everyone wrong - the problem is it has cost about 50,000 kodak employees their jobs and soon many more employees will be let go.

  • Report this Comment On December 13, 2011, at 11:49 AM, jerr1 wrote:

    well if every one lost faith with him why did govenor new york put him as a advisor for jobs new york state. an obama team of advisors

  • Report this Comment On December 13, 2011, at 11:56 AM, prosperpress wrote:

    Yes, good decision by the Govorner of New york, after all, what a track record taking a company and destroying 96% of its value. Maybe he is a member of the funny handshake society. Perez is 67 years old and has been a disaster for Kodak, I am sure that if I ran my own business as well as Perez runs Kodak it would no longer exist. I feel so sorry for all of this e=loyal employees of Kodak who have given their lifes service who must feel sick to see this happen.

  • Report this Comment On December 13, 2011, at 11:58 AM, trysson wrote:

    Thanks, Irmacds, for great insight and for sharing it with us!

  • Report this Comment On December 13, 2011, at 12:06 PM, trysson wrote:

    One of the other companies that sprang up in Rochester, Gannett Co, Inc., has a mandatory retirement age. Does EK have such a policy?

  • Report this Comment On December 13, 2011, at 12:11 PM, prginww wrote:

    Bill Gates and Antonio Perez both have one thing in common. Neither one graduated from college. Yes, Perez has NO degree.

  • Report this Comment On December 13, 2011, at 9:03 PM, jerr1 wrote:

    Reality check here kodak will eventually be another case get back bussness much leaner an profitable company in 2012. Last 6 years of dismantling its huge manufactoring base in usa which proved to be good investment . In today dallors it would be alot more expensive to do now they save billions.Unforently wall street only sees dallor an cents profits is only line it sees. One thing wall street does know is techolgy is changing faster with every year. So products made today are improving way we use them like cameras. Digital camera we use today are far more advance then digital cameras made 3 years ago an speed of those improvment s is gaining. Kodak cameras today are top of line

  • Report this Comment On December 13, 2011, at 9:30 PM, jerr1 wrote:

    Most kodak employees feel fortunent they had kodak as employer gave them livly hood to raise familys. Just like any othe company must change to adapt to new products.I saw xerox do same use to be 5600 union employees in manufactoring . Now most of which is done by other comanys for xerox now .An by xerox changing they made come back from 10 years hard work dedication . Kodak has made alot good choices some of which people dont like but then to survive in this world economy test of time will tell if kodak can come back like xerox did

  • Report this Comment On December 14, 2011, at 1:06 PM, prginww wrote:

    Kodak will probably survive - but at the expense of it's employees. The CEO's, VP's, etc. will make their millions while those who worked for Kodak for 20, 30 or more years - are the ones that get the shaft. Yeh, it was good while it was good - but those days are over. Just doesn't seem fair a CEO can come in from HP - make millions upon millions to basically fire 50,000 employees and run the company in the ground and loads his bank account. It's white collar crime.

  • Report this Comment On December 14, 2011, at 5:14 PM, trysson wrote:

    I have to agree with you, Irmacds. Criminal it is.

  • Report this Comment On December 14, 2011, at 6:14 PM, prginww wrote:

    As a 20 plus year Kodak employee - I'm offered 1.5 weeks severence package per year of service. Perez on the other hand as do all Tier One manager get THREE times their annual salary plus three times their annual bonuses - no matter how many years of service. So you work for Kodak one year as a VP and you get THREE years serverence. I would have to work over 100 years to get that package!

  • Report this Comment On December 15, 2011, at 7:58 AM, jerr1 wrote:

    Why people beleive they are intitled to what others get beyond me . Called food chain top always get best. Chips are down ceo is always the bad buy . Personlly i feel lucky i had job from last employer. I dint get anything when i left an thankfull for all years i had . I have my health an life time good memorys to look back at .Dint stop me from trying either when i quit i went right out looking for better job took 7 months but i found better job maybe not with same money but then ill probley liv longer an healthier not being exposed to toxic chemicals labled mtd

  • Report this Comment On December 15, 2011, at 8:52 AM, MajorBob04 wrote:

    @Irmacds: two months ago you wrote that you were an Amazon employee. How can you be a 20 plus year Kodak employee if you worked for Amazon a couple months ago??? Or do you work for both companies?

    I'm surprised at the severance package for Perez or the VP - where did you get that information? Link to the source please.

  • Report this Comment On December 15, 2011, at 8:19 PM, jerr1 wrote:

    shorts are in for rude awaking come december 17th options are up . Kodak isnt talking either

  • Report this Comment On December 16, 2011, at 2:38 AM, Ironbob wrote:

    Maybe if they stopped play Little Miss Diversity 2011 and fired the moron that's done nothing but drive them into the ground, they'd have some hope. How any company would let Perez pose as their CEO and Chairman is beyond me.

  • Report this Comment On December 16, 2011, at 9:36 AM, prginww wrote:

    Perez wants to step down but the Board wants to keep him. At 67, I'm sure he would rather take his parachute and not have to worry about the mess he's put Kodak in. His days are numered as are many jobs for Kodak employees.

  • Report this Comment On December 16, 2011, at 11:24 AM, TMFCop wrote:

    @MajorBob04,

    And irmacds was an employee at Best Buy before that! He does get around.

    Rich

  • Report this Comment On December 17, 2011, at 9:06 AM, jerr1 wrote:

    Why people see only what they want to see kodak is a brillant company who making all right choices for company an its people. Present techolgy kodak has will bring forth new products. Film has other purposes other then just cameras,but it still used in making movies. Digital pictures is still evolving fast an so are cameras. Which kodak makes great line digital cameras. Future is brite for kodak an its employees

  • Report this Comment On December 18, 2011, at 8:48 AM, jerr1 wrote:

    I find very intresting about these articles is how much imfomation is given to facts are negitive driven or suggested to be. Back in October kodak drew on line credit an seemed every one blew it out porotion. Bankrupcy an illegal borrowing money list went on an on suggesting thing actually never occured. Really intresting thing is this so kodak drew on line credit which probley was paid back allready from its selling of assets in rochester ny. So why dont wall street anounce this like they did with oringinal comment. Finch an other rating companys gave kodak negitive out look an down graded them for borrowing the line credit. Whats the agenda here if kodak paid it back then rating should be reversed in good faith . But then rating companys only intrest is the negitive side suggestion kodak is risk when in fact it isnt

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