The Corner

by Bart Ward

I have seen many a stock come and go on the New York Stock Exchange (NYSE). It is a sad day when the iconic tic symbol “EK” will no longer stand for Eastman Kodak. Last week Kodak filed for bankruptcy and the NYSE delisted the company. While it is possible that the company may survive, it’s more likely that its pieces will be broken up. So be it, as that is what should happen to a company that is no longer competitive. There will be no bailout, as it should be. If they survive it will be because they figure it out on their own.

There have been many companies, from autos to shipbuilders to high tech that have gone under and parts of their operations were picked up by other companies. It is only in the past 30 years or so that we have seen the era of bailouts and more. Not for Kodak. Parts of it will survive as will employees—most likely under a different company’s name. This is what happened to Westinghouse.

The formation of Eastman Kodak dates to 1881. In that year George Eastman and Henry Strong started the Eastman Dry Plate Company. Eastman, going back to the 1870s, was the first to catch on that gelatin dry plates were better than wet plate photography. This is where they got their start.

Rochester, N.Y., was where the company was formed and still resides to this day. By 1884 Kodak and Strong changed the business from a partnership to a corporation with other shareowners. The company’s name was changed to Eastman Dry Plate and Film Company. It would be one year later in 1885 that Eastman Negative Paper went on the market. In 1889 the name changed to Eastman Company and in 1892 it changed again to Eastman Kodak Company of New York. Finally, in 1901 the company was reorganized and called Eastman Kodak Company.

But it was 1888 that will be remembered by photo, Kodak and history buffs. For it was that year the name “Kodak” was made up and trademarked with the introduction of the Kodak camera. The ad slogan was, “You press the button—we do the rest.” In 1898 the folding pocket Kodak camera was introduced and in 1900 the Brownie camera came onto the market—and the rest is history.

For the next 100 years Kodak became a legendary photo and film company that carried with it a storied past. It was at the end of that next 100 years, that the company began its long slow decline as legacy costs began to eat at the profits and mistakes in marketing came one after the other—for it was Kodak that invented the digital camera in the mid-1970s. Back then, Kodak invented “solid-state image sensors.” These sensors “converted light to digital pictures” that both pros and amateurs could use. And in 1986 the folks at Kodak produced the first megapixel sensor. Kodak worked with such icon companies as Microsoft, IBM, Nikon and so forth by the 1990s, but was unable to capitalize on the digital market and fumbled in other markets that it was a leader in.

The tough minded Kay Whitmore led Eastman Kodak for three years in the early 1990s with little success. The company was organized into four business segments—photographic, information, health and chemicals. Whitmore was eventually fired and in 1993 George Fisher, who had led Motorola to the top, becomes the first outsider to head the company. Many thought that Fisher would turn Kodak around. It was under Fisher that Eastman Chemical was spun off to shareholders. In 1994 Fisher divested the company’s pharmaceutical arm, Sterling Winthrop. Then in 1997 the World Trade Organization ruled against Kodak in its fight with Fuji Photo Film. This was followed by the sale of its office imaging business in 1999. From there on it only got worse.

This week I saw a picture of Tom Edison and George Eastman working together. I thought to myself, what would they have to say today about the sad state of affairs at the renowned Rochester company? Also this week, longtime NYSE floor specialist Tom Fachinne touched base with me with this quote, “Kodak has now become a case study of a company that went from infancy and innovations to maturity and missteps.”

My experience on the floor of NYSE goes back to the days when John Phelan (who eventually sat on Kodak’s board) was chairman and CEO of the exchange in the mid 1980s. When I first hit the floor, Robb Peck McCOOEY & Co. was the specialist in the venerable Kodak at trading post number 13. Kodak was a heavily traded Dow Jones Industrial Average stock. There were millions and millions of dollars made in Kodak by many a smart investor and trader over the decades. Big blocks of stock regularly rolled across the tape, as the stock was one of the favorites of institutions and little investors alike. If Kodak goes completely away and another company gets its iconic tic symbol, “EK,” it just won’t be the same. What a storied company—what a legendary stock. Wow!

Quote of the Week: “We will be the largest manufacturer of photographic materials in the world, or go to pot.”— George Eastman

Bart Ward is the chief executive officer of Ward & Co. Ltd. an Anoka based registered investment advisor – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.

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