5/2/2014 How Kodak Is Recovering From Bankruptcy (KODK)

http://www.fool.com/investing/general/2014/03/24/how-kodak-is-recovering-from-bankruptcy.aspx 1/2

How Kodak Is Recovering From BankruptcyBy Adrian Campos | More Articles March 24, 2014 | Comments (0)

Once regarded as a solid blue-chip company, Eastman Kodak (NYSE: KODK ) began tostruggle financially in the late 1990s due to a continuous decline in sales of photographic film.Kodak's management failed to identify digital photography as a disruptive technology, and thecompany eventually ended up filing for Chapter 11 bankruptcy protection in January 2012,and had to sell its photographic film, patents, commercial scanners and even kiosk operationsin order to survive.

In September 2013, the company emerged from bankruptcy after exiting several failedbusinesses. Now, the company has a new business plan, which focuses on commercialimaging and printing, a space where competitors Hewlett-Packard (NYSE: HPQ ) and

Fujifilm Holdings are quite strong. Has Kodak learned its lesson? How exactly does the company plan to turn losses intoprofits, and become a leader in commercial imaging?

Source: Eastman Kodak Investor Relations

A narrow focusThe new Kodak plans to focus on commercial imaging and graphics, together with providing digital printing solutions tobusinesses. In the past few quarters, the company exited, divested, or harvested most of its non-core businesses andassets. This allowed the company to eliminate various legacy liabilities, including losses related to Kodak Gallery, whichwas once the company's consumer online digital photography website and served more than 60 million users at its peak.

CompetitorsThe commercial imaging space is dominated by Hewlett-Packard, which owns a wide portfolio of industrial printingsolutions. Hewlett-Packard's Indigo Division has several years of experience developing and marketing digital, offsetprinting presses, consumables and workflow solutions.

Fujifilm Holdings is another important name in the commercial printing space. The company is a leading manufacturer ofcomputer-to-plate systems, which allows printing companies to make printing plates directly from computer data, skippingthe film stage. Fujifilm manufacturers offset printing plates in China, Japan, the United States, and the Netherlands.

Innovation and brandingTo compete against these giants, Kodak will have to put innovation first. As Forbes contributor John Kotter notes, thecompany must encourage and welcome pie-in-the-sky ideas.

Note that most of Kodak's patent portfolio has been sold off. However, the company still retains great technology andengineers. For example, a team of more than 100 engineers have worked for more than five years to create Kodak StreamInkjet Technology, which delivers offset-class output with the ability to perform high-speed, variable-data printing at lowcost. More important, Kodak is still a highly recognizable brand.

Early resultsIt's too early to know if Kodak's new business plan will succeed. The company ended 2013 still in the red. Kodak's

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5/2/2014 How Kodak Is Recovering From Bankruptcy (KODK)

http://www.fool.com/investing/general/2014/03/24/how-kodak-is-recovering-from-bankruptcy.aspx 2/2

overall sales for 2013 came in at $2.35 billion. Revenue for the most recent quarter came in at $607 million, down from$739 million a year earlier. Sales, which fell 12% at the company's graphics, entertainment, and commercial filmsbusiness, were not enough to prevent a net loss of $63 million.

On the bright side, net loss is down from $402 million a year ago. 2014 will certainly be a key year for the company, andinvestors should monitor both revenue and profitability figures in detail. The company is not forecasting a majorturnaround, and it forecasts sales volume for 2014 in the $2.1 billion-$2.3 billion range.

Final Foolish takeawayKodak, once a powerful player in the imaging and photography industry, is trying to recover by narrowing its businessfocus. The new Kodak plans to gradually become a leader in the commercial imaging industry, a space currentlydominated by Hewlett-Packard and Fujifilm. Although the company has made some progress in reducing its net loss perquarter, it's too early to know if Kodak's new business plan will succeed.

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Adrian Campos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocksmentioned. 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 adisclosure policy.

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