Fiery Flash: Eastman Kodak

Old glories don’t fade away easily, but they do lose their shine. Eastman Kodak is a perfect example of such a faded glory. Yet, in 2024, and particularly last week, the company proved itself a strong contender for our Fiery Flash segment. Since the start of the year, the company’s stock price has risen by 83%, with an additional 30% increase just last week.

Before diving into what triggered last week’s stock surge, let’s first reflect on why Eastman Kodak lost its shine in the first place. It’s a classic example of what is often called "the innovator’s dilemma": a dominant company that becomes so successful in its existing business that it invests too late and inadequately in new technologies, which ultimately undermined its core activities. 

In 2012, Eastman Kodak filed for bankruptcy, a consequence of its delayed and inadequate response to the digital revolution. Despite inventing the first digital camera in 1975, the company remained too focused on its highly profitable traditional film business. When the transition to digital became inevitable, Kodak had to sell off profitable divisions, such as its healthcare unit, to fund its belated digital transformation. In 2007, the healthcare division was sold for $2.35 billion to Onex, which rebranded it as Carestream Health. Later, in 2022, Carestream sold a significant portion of its detection business to Varex Imaging. This late pivot, coupled with high operational costs, heavy pension liabilities, and the erosion of its market dominance by digital competitors, resulted in Kodak’s downfall. 

Kodak relaunched in January 2013 after an 18-month-long Chapter 11 restructuring. It sold $2.8 billion worth of patents to a consortium of technology companies, including Apple, Google, and Microsoft, and transferred its consumer film business to the UK pension fund. The relaunch focused on B2B activities, emphasizing digital printing technology and enterprise services, as well as specialty materials and chemicals for industrial applications. Since its relaunch in 2013, Kodak has faced significant challenges, with revenues declining from approximately $2.4 billion in 2013 to around $1.1 billion in recent years. In 2024, Kodak’s financial performance remains mixed, with an 8% decline in revenues, though there are minor signs that profitability may be stabilizing. The company claims to be focusing on improving operational efficiency and making strategic investments in growth areas, but the impact of these efforts remain to be seen.

So, why then has the share price surged 80% this year? The first significant boost came after news in February 2024 that the company was exploring ways to monetize its overfunded pension plan. This week, Kodak announced the restructuring of its overfunded pension fund, starting with the sale of $850 million in illiquid pension assets for approximately $612 million. After settling all pension obligations, Kodak expects to retain $885-975 million. Of this amount, 25% ($220-245 million) will fund a new employee pension plan, 20% will be allocated to excise tax payments, $315 million will go toward debt repayment, and $215-270 million will be reserved for strategic growth initiatives. Eastman Kodak’s current share price, after 80% surge, amounts to $574 million. 

The corporate story of Eastman Kodak inevitably brings to mind Agfa-Gevaert, whose trajectory is closely intertwined with that of its historical competitor. Today, Agfa-Gevaert’s market capitalization stands at approximately €117 million, reflecting its own challenging journey through shifting industry dynamics and financial restructuring.