Eastman Kodak: Exchange your pictures via computer Message Board

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Technology Stocks : Eastman Kodak: Exchange your pictures via computer

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To: William Lee who wrote (32)	7/22/1997 4:06:00 AM
From: Nero	of 87

William, Kodak sales are seasonally sensitive. People are expected to shoot more family photos on summer vacation. Analysts are rightfully focusing (pun intended) on EK's quarter year-to-year. EK was carrying a very high PE -- not so much on high-tech levels of growth, but on Kodak's ability to deliver steady 10% growth year after year. The stock also benefits from index buyers blindly grabbing Dow 30 stocks. The near-term is not wonderful. The quarterly statement painted a grim picture (yikes, it's hard to drop a metaphor around EK without it becoming a bad pun) for the remainder of the year, and pointed toward increasingly effective competition (Fuji) in its core film business as well as industrial chemicals and processes. The market for digital cameras is difficult because of high prices and more nimble competition. I expect analysts to be lowering their recommendations over the next few weeks, with painful drops as the investing sheep fall in line. Management fired the ad agency that Kodak used for 50 years. EK's productline is confusing and poorly marketed. Senior vice president's heads have rolled. Chairman and CEO George Fisher assured the Street that this year's numbers are an aberation, but Kodak has already broken its pact with investors by posting declining earnings. Fisher has his hands full with Kodak and backroom politics he botched on the board of ATT. EK carried the high PE on slow, steady growth. It ain't happening this year. It's slow, steady decline. What will turn it around? Kodak's size works against it now -- it's like changing the course of an oceanliner with a rowboat. I'm short Kodak. I expect a trading range of 60-70 for the rest of the year if the Dow stays healthy. If the market pulls back, overbloated, old-guard firms like EK will take the brunt of the correction and low 40s is not just possible, but likely. The overly generous dividend may temporarily prop up the stock price, if Kodak chooses to maintain the dividend rather than pour it into R&D where it's sorely needed if they're to successfully reinvent themselves as a high tech company. This firm needs a major shakeup. I don't think the old, tired management in Rochester is yet ready to face the wrenching change and downsize. Don't be fooled by the brandname. It feels like IBM in 1987, when everyone thought nothing could happen to Big Blue -- until the bubble burst and its was just another struggling company. It took years for IBM stock to recover. nero

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