To: StocksDATsoar who wrote (81194 ) 3/3/2001 9:21:35 PM From: john Respond to Eastman Kodak (EK) 42.41 -2.41: Kodak has suspended its share repurchase program in the face of a weakening economy apparently to increase financial flexibility and accelerate their debt reduction efforts. There are a few ways to interpret this announcement, but regardless of the underlying motivation, it appears to be the right move in this environment. One assumption, and probably the first one that comes to mind in this market environment is that the company is anticipating lower-than-expected sales and cash flow, and does not want to earmark funds for buybacks. The company of course denies this was the cause and we'll take them on their word...for now. Another interpretation would suggest that if a share repurchase indicates management confidence in the company's prospects and a belief that the shares are undervalued, then by contrast one could draw the assumption that a decision not to repurchase indicates management uncertainty and/or pessimism in business prospects and a belief that the shares are fairly valued or overvalued. Certainly EK would not be alone in experiencing limited visibility in this economy. Another conclusion, and one that the company asserts, is that they are trying to reserve some cash for strategic acquisitions. This is the most promising of possibilities if you're a shareholder. An acquisition to beef up the consumer digital imaging business would likely garner support on the Street given the deal was a good fit and the price was right. The company had recently been aggressively repurchasing shares (about 10 mln in Q4), indicating management's confidence in prospects and commitment to shareholder value. With the Dow 50 points lower, it's hard to attribute today's EK selling entirely to today's announcement, but nevertheless it is a 5% drop. We still have quite a few doubts regarding Kodak's ability to transition to the digital age given their massive infrastructure devoted to consumer film processing. However, the company has created an opportunity to enhance value by pursuing an acquisition that will advance their stature in the consumer digital market, and it has indicated that acquisitions are likely. Although probably the right move, today's announcement raises more skepticism than confidence...an acquisition of sufficient magnitude, in the right space, at the right price within the next few quarters would go along way in quelling that skepticism. -- Matt Gould, Briefing.com
