Dear Kodak

Discussion in 'Kodak' started by Alan Browne, Jul 25, 2003.

  1. Alan Browne

    Alan Browne Guest

    I'm not debating a single thing you say, except that Kodak are not
    losing money, they're posting profits ($770M earnings in 2002 up 10
    times from 2001), but on a contracting business base (sales down $394M
    or 3%). The "Dear Kodak" thread is about Kodak splitting into legacy
    and new 'digital' businesses. Under the digital business is where the
    diversifications for growth in those areas should occur...without the
    hindrance or burden of the legacy 'film' business.

    According to what you write, you should be happiest if Kodak focus
    entirely on a digital world. Those of us who will be shooting film for
    the forseeable future (for our own reasons, even if they don't seem
    valid to you), would like Kodak (and Fuji) to put out high quality film
    products and services at a reasonable cost.

    I believe that Kodak (and perhaps Fuji as you point out) should split
    their businesses in order to do so.

    We care, even if you don't.

    Cheers,
    Alan
     
    Alan Browne, Jul 27, 2003
    #41
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  2. Alan Browne

    Alan Browne Guest

    The justification is the persuit of profit and growth in shareholders
    equity. They are making profits now, but shareholders equity has fallen
    nearly threefold in 5 years. Splitting the company will allow both
    companies to persue their areas of excellence; and possibly, if the film
    business begins to tumble, then a strong pillar will remain where the
    other crumbles without affecting the strong one. As structured at this
    time, regardless of strengths in digital, a fast failure of the film
    side will choke cashflow needed to grow the digital side quickly. What
    I propose gives all the cash-on-hand to the digital company and the film
    company has to run on revenues from its well establised legacy business.
    This would both reduce Kodak's value and give Fuji a near monopoly in
    film. The only winner would be Fuji. The losers would be film users.

    In any case it will not happen for at least two reasons: 1) The benefit
    of this to Kodak would be a huge cash chest to spend on digital business
    development. Fuji aren't going to give Kodak the keys to the Kingdom to
    acquire a legacy business that they are already beating while depriving
    themsleves of the cash they need themselves for the same digital
    developments.

    (I'd guess the value of Kodak's legacy film business to be on the order
    of $3-6B based on Photography earnings in 2002 of $770M (film+digital,
    don't know the split) ... and that takes into consideration its
    dwindling base and films' dwindling base. Fujifilm prob doesn't have
    that much cash and would not borrow it to buy Kodak film).

    2) The deal would never pass antitrust.
    Well, at least you ended on a high note. Except, ahem, what is the
    trade in value on your D60?

    Alan.
     
    Alan Browne, Jul 27, 2003
    #42
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  3. Alan Browne

    ThomasH Guest

    Software manufacturing has its own rules, beyond the scope of
    this group...
    Yes indeed. Nothing really compares to US aviation, large scale and
    general aviation alike. Quality of maintenance though is rather
    questionable and so is sometime the standard of the aircraft. Think
    of the fate os PanAm and TWA. I was personally in an Delta aircraft
    which dumped fuel and emergency landed just 40min after takeoff.

    Being a pilot by myself I see no place on earth setup better for
    affordable flying, but this base of short cycle of maintenance
    and overhauls. The aircraft, instrument panels and interior are
    rather scary to non pilots! But since we have here 240.000 aircraft
    and some 750.000 pilots, no other place can really develop a market
    for avionics. End of cold war and information advantage is another
    aspect here. GPS is the predominant modern mean of navigation and
    even the Japanese companies did not managed so far to provide any
    competition to Garmin, Magellan or Lawrance despite being so good
    in these small hand-held devices,
    ...such as 35mm and digital cameras...

    That is actually not correct. Airbus is an international
    consortium with huge German background force behind. Airbuses are
    being assembled on many places in Germany, France and England and
    being transported using Super Guppies or Belugas to a final delivery
    port. Touluse is one of them, Hamburg and Bremen are others.

    And Aviation Week wrote recently about "secret leader in aviation"
    naming the quiet background works of German companies. They stated
    if if you put a 737 on a scale, 20% of its weight is "Made in Germany."
    Good for passengers, if I may say so.

    Conclusion should be that *all* big airliners are assembled with best
    parts and patents the planet has to offer. Only Boeing has managed
    to survive in the business. The quality of work of others (MD80 !!)
    does not rebut the thesis of companies being busy with improving
    stock value quarterly in lieu of working on evolutionary
    improvements.

    Thomas.
     
    ThomasH, Jul 27, 2003
    #43
  4. Alan Browne

    Alan Browne Guest

    I'm from the avionics business (as well as being a licenced commercial
    pilot). The Airbus 320 for example, has Smiths FMS' (UK), Thales
    (Sextant) glass (France), Collins MMR and WX-RDR (US) and many other US
    avionics parts.

    Engines, WX-RDR and other items are customer options, not Airbus
    decisions. I'm just scratching the surface here.

    On the A-380, the cockpit will dominated by Honeywell integrating many
    boxes of their arch-rivals Rockwell-Collins and Thales (Sextant), and
    Goodrich are supplying a raft of items. All of the above from the US.

    Again, engine decisions for the A-380 will be the airlines. GE and
    competitor P&W are offering one 100% US engine, the GP7200; Rolls will
    offer the Trent 900; I'm not sure if their is a continental offering.

    IOW: the Airbus' are not just built from Airbus/European companies.
    (Whether built in France, Germany, Spain it is simply Airbus. Only BAE
    Systems UK (20% owner of Airbus) maintains a non-Airbus name.)

    Cheers,
    Alan
     
    Alan Browne, Jul 27, 2003
    #44
  5. Alan Browne

    Lewis Lang Guest

    SNIPS
    Hi Alan:

    My lack of financial expertise has me confused here, could you explain the
    above to me? - is Kodak up or down (or both!?!) and in which ways? It seems
    kind of contradictory to me, profits are up but"contracting business" (whatever
    that is)/sales are down - this has got me completely confused. Thanks in
    advance for your help.

    Regards,

    Lewis

    Check out my photos at "LEWISVISION":

    http://members.aol.com/Lewisvisn/home.htm

    Remove "nospam" to reply
     
    Lewis Lang, Jul 27, 2003
    #45
  6. Alan Browne

    Alan Browne Guest

    The NG message was copied directly to Kodak corporate. It will likely
    die there as far as EK are concerned. If you have mutual funds, you
    probably own a tiny chunk of them already.

    Self serving? I suppose so, if Kodak (and Fuji, Ilford, AGFA,
    Konica...) put out good film product lines then I am being served.

    As to your last sentence I really can't help how anything I write
    strikes you.

    Cheers,
    Alan
     
    Alan Browne, Jul 27, 2003
    #46
  7. In 1985 the Japanese Association of Motorcycle Manufacturers gave their
    highest award to BMW for the design of the K-100. - Definitely not something
    that shows a biased perspective......
     
    William Graham, Jul 27, 2003
    #47
  8. Alan Browne

    Alan Browne Guest

    Hi Lewis,

    Basically you can have a million bucks in revenue, but if your costs are
    $990K you have made only $10K.

    Then the next year you have only a half million in revenue, but if your
    expenses are only $400K, then you have $100K in earnings. So your
    business base has contracted, but you're making 10x more money at the
    end of the year.

    What has happened at Kodak is that their revenue is reduced 3%, but
    their earnings have gone from $76M to $770M. It appears they took on
    "restructuring" costs of $659M in 2001 which would explain, mostly, the
    earnings difference. (Actually I should have said that in the other
    posting). They also claimed 0 goodwill amortization (v. about $150M in
    previous years) due to the adoption of new accounting practices (which
    make earnings look better!).

    What is more startling is their net earnings from 2002 are 770M v. 1.4B
    in 2000.

    The other down is the year over year decline in shareholders equity.
    Almost 3 times less value over 5 years.

    Cheers,
    Alan
     
    Alan Browne, Jul 27, 2003
    #48
  9. Alan Browne

    Alan Browne Guest

    Karen blazed, indignantly:
    Alan recovers thus:

    Found it. At my girlfriend's house. It was in the issue of Fortune in
    which they featured the Rolling Stones. I never buy Fortune, but her
    son had due to the RS article.

    Again, the point here is not why the Japanese system is unfair to
    competition, but why the Japanese system is in fact bad for Japan.

    If you can get a copy of the article and read the whole thing, please
    do. I'm not going to type it all! But see a couple exerpts below.

    Enjoy,
    Cheers,
    Alan.

    Sept 30 2002 issue, page 91 "We're not turning Japanese", Bill Powell.

    A direct quote from the article:
    'In fact, Japan is now known as the zombie economy - because so many
    businesses remain alive when they should have died long ago. The reason
    is Japan's banks, and indeed the country's capital markets, remain
    supremely dysfunctional. Bank loans account for 60% of all corporate
    debt in Japan. In the U.S., by contrast, 61% is capital market debt.
    "This is an important distinction," says Kathy Matsui, chief investment
    strategist at Goldman Sachs in Tokyo. Capital markets tend to determine
    prices quickly and ruthlessly, she says, but "a bank-based system means
    that pain can be deferred."'

    and

    'Not surprisingly, and with the approval of the government, the banks
    have spent the past ten years blinking. Instead of clearing the field
    of their dead and loaning money to new customers that might create jobs
    and provide the economy with some life - which is what real capitalist
    systems are supposed to do - too many banks in Japan have been propping
    up companies that otherwise would perish.'

    There are a variety of other comparisons in the article, but I'm not
    going to keep on hammering here. Try to find the back issue.
     
    Alan Browne, Jul 28, 2003
    #49
  10. Alan Browne

    Lewis Lang Guest

    Hi Alan:
    Thanks for explaining it, this part I understand but...
    That means there earnings have gone up 10 times but their revenue (how is this
    "revenue" different form earnings, is this the monet they already have before
    earnings or is revenue equivalent to earnings?) is down by 3% - again, I'm
    sorry, but I just don't understand how this wroks...

    It appears they took on
    Wouldn't restructuring *costs* decrease the amount earned? - yet above you
    claim that earnings have gone up from 76M to 770M, a factor of 10 times more
    money earned. Again ,I'm confused here.

    (Actually I should have said that in the other
    What does goodwill amortization mean in goodwill English ;-) (so I can
    understand it)? And how does this affect the profit picture?
    Still confused, where does the 76M come in then?
    Why would shareholders equity decline if the company (as it seems from all of
    the above, unless I'm mis-reading it) if earnings are up from 76M to 770M -
    this completely baffles me.

    I'm not an idiot, just very very confused about the issues involved here.
    Thanks for your past and future explanations so I can understand all this.

    Regards,

    Lewis

    Check out my photos at "LEWISVISION":

    http://members.aol.com/Lewisvisn/home.htm

    Remove "nospam" to reply
     
    Lewis Lang, Jul 28, 2003
    #50
  11. Alan Browne

    Lewis Lang Guest

    Subject: Re: Dear Kodak
    I'm not sure if I agree w/ splitting Kodak up at this point or not (I'm more
    concerned w/ their corporate arrogance and their over-willingness to
    discontinue good products and their seemingly mindless delving into digital
    which is not their forte') but I do appreciate you raising these issues and
    bring them to our attenition. Kepp up the good work, Alan.

    Regards,

    Lewis

    Check out my photos at "LEWISVISION":

    http://members.aol.com/Lewisvisn/home.htm

    Remove "nospam" to reply
     
    Lewis Lang, Jul 28, 2003
    #51
  12. Alan Browne

    Alan Browne Guest

    Were I to go out and shoot photos instead ... sigh.

    Cheers,
    Alan
     
    Alan Browne, Jul 28, 2003
    #52
  13. Alan Browne

    T P Guest

    No, I haven't sufficient personal knowledge. But I showed your
    ridiculous posting to a friend who has (he is a Director of an
    aerospace company) and he said he had never laughed so much in years.

    He asked me to pass on his thanks.

    ;-)
     
    T P, Jul 28, 2003
    #53
  14. Alan Browne

    T P Guest


    Nothing compares to the massive subsidy given to the US aerospace
    industry by the US Government. That subsidy is greater than the GDP
    of most countries of the world.

    Given the massive cost to the American taxpayer, the results had
    better be good.

    However, the assertion that mass layoffs have not affected the quality
    of US-produced aircraft is patently false. The misplaced false pride
    of Americans in everything American doesn't alter the facts.
     
    T P, Jul 28, 2003
    #54
  15. Alan Browne

    T P Guest


    Yes, it's the same Boeing.

    It is not the same Boeing whose reputation for quality in the 1950s
    and 1960s was very high, and deservedly so.
     
    T P, Jul 28, 2003
    #55
  16. Alan Browne

    T P Guest


    Whereas Alan Browne is an expert in pouring vitriol over every subject
    under the Sun, regardless of his lack of knowledge of any of them.

    ;-)
     
    T P, Jul 28, 2003
    #56
  17. Alan Browne

    Alan Browne Guest

    Name him and the company.
     
    Alan Browne, Jul 28, 2003
    #57
  18. Alan Browne

    Annika1980 Guest

    From: Alan Browne
    I wouldn't know. Why would anyone want to trade one in?
     
    Annika1980, Jul 28, 2003
    #58
  19. Alan Browne

    Annika1980 Guest

    From: Alan Browne
    This is exactly what is happening anyway. At least by selling off the film
    division Kodak would have some bucks to show for it. If they don't sell it,
    then the film division will continue to drain the company's resources as you
    have mentioned.
     
    Annika1980, Jul 28, 2003
    #59
  20. Alan Browne

    Alan Browne Guest

    Read my entire reply: Fuji will not be giving cash to Kodak for the
    film division.

    And I did not say that film was draining Kodak's resources; I said that
    Kodak are not operating their company along the lines that would best
    serve the digital and film markets.
     
    Alan Browne, Jul 28, 2003
    #60
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