imokruok
Well-known
The licensing of the trademark could be done. It happens in a lot of deals where the spinoff needs the name to succeed. You just have to pay Kodak for the privilege. The issue would be the direction that the rest of Kodak would want to go without the film division. If you're going to pour millions into marketing film, they're probably not going to license you the name. If they're developing digital, it's a huge marketing blunder on their part to let someone else plaster the public airwaves with their name and word "film."
And yes, precisely right on the premise of doubling sales. That's really the key to a successful LBO. You've got to find growth or margins that the previous owners didn't. Sure, you can steal market share from other film producers, but that only gets you so far in a collapsing market.
Frankly, I don't think it can be done, but if it were to be attempted, I'd definitely try to break down the film v. digital debate that everyone likes to have. It's not an either/or choice - both formats have their uses. But the argument becomes less and less viable as film becomes harder to develop, and that happens every time another in-store processing lab disappears.
raytoei@gmail.com
Veteran
Kodak has a market cap of 1.63 bn, it has cash on hand of 2bn and a long term debt of 1.2bn on its balance sheet. We could buy lots of kodak shares in the open market for 1.63 bn and have a controlling stake in it. Then we force management to issue a one time dividend of 2bn back to us and then we can buy lots of Noctilux 0.95 lens for all of us or launch a hostil buy out of Leica. Then we will have the best of all worlds, lot of Lens and Film to go with it...
... I doubt if it is worth 2bn for its film division, perhaps 500m + another 500m loan to Kodak to pay its debt. We can't assume that profits are going to be constant forever.
... I doubt if it is worth 2bn for its film division, perhaps 500m + another 500m loan to Kodak to pay its debt. We can't assume that profits are going to be constant forever.
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larmarv916
Well-known
Ok...if your serious, just pick up the phone and call the boys at Goldman or Morgan Stanley. You, make it clear this is leverage buyout. You will need to be willing to over pay...on the buyout price. But in the end you find out what I keep telling everyone...Kodak just happens to make film, they could make washing machines and would not behave any differently.
So feelings are correct...buy again customer do not matter to Kodak. Just like "Govt. Motors" is killing Saturn..after all the BS about how GM Loved it's loyal customers. Kodak's film division could have been a profitable for years, but when you behave like the federal Govt. you get the same results..failure !
Let me know what reaction you get when you call the "MA" boys at Goldman.
So feelings are correct...buy again customer do not matter to Kodak. Just like "Govt. Motors" is killing Saturn..after all the BS about how GM Loved it's loyal customers. Kodak's film division could have been a profitable for years, but when you behave like the federal Govt. you get the same results..failure !
Let me know what reaction you get when you call the "MA" boys at Goldman.
erik
Established
Interesting scenario to present to a lender.
"Kodak is unloading their film division because film sales are dropping like a rock. I want you to lend me a few billion so I can but that division."
Yeah, that'll work.
That is pretty much what happens when a private equity company takes over, the company being bought borrows the money that the equity company uses to make the takeover. It's nuts.
degruyl
Just this guy, you know?
Maybe it is me, but wouldn't it be smarter to attempt to purchase the (rights to) the intellectual property and a processing line in eastern europe or somewhere?
And while we are at it, bring back some paper...
I still have to go with: buy some film. Everyone. Lots of it. Maybe they will notice. Do you have any idea how much film $1m is? Neither do I, and I never will.
I love film, but the processing lines at Kodak are way too big for the current market. This is a case of economy of scale biting them on the ass.
And while we are at it, bring back some paper...
I still have to go with: buy some film. Everyone. Lots of it. Maybe they will notice. Do you have any idea how much film $1m is? Neither do I, and I never will.
I love film, but the processing lines at Kodak are way too big for the current market. This is a case of economy of scale biting them on the ass.
acheyj
Well-known
Jeez dont let Ken R know this.
gnarayan
Gautham Narayan
Or I can assume that very smart people* have crunched the numbers and found them wanting.
More carefully than a guy on RFF who a mere 8 posts before yours admits that he can't tell the difference between 10 billion and 2 billion certainly.
Kodak's name will survive.
I could laugh, but really I just find it all kinda sad.
Cheers,
-Gautham
EDIT*: Among them, the people at Kodak themselves.
http://www.reuters.com/article/idUSN0420839720100204
That'd be their own numbers, not what analysts make of them.
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Rayt
Nonplayer Character
The Kodak brand is synonymous with film so for purposes of marketing alone it would be wise for Kodak to retain its film business even if it means some of the less profitable offerings get discontinued. The top brands often spend tens of millions on marketing per year so film does not need to be the key market for Kodak to sustain it. Also if Kodak sells its film division to a third party along with its name including various brands like Tri-X, Ektachrome, etc., and this third party potentially drags the good names to the ground then Kodak should just as well just put everything in a museum and come out even.
The consumer film market is not sustainable in the long run and in the near future film will be for serious film shooters. People like me (and I can't speak for you) don't care about branding. If I like a film and I will shoot a bunch to test it and not rely on marketing I will use it whether it may be made in China or the North Pole. Having a third party cranking out inferior Plus X won't do it for me whether the box is yellow or not if quality and consistency cannot be sustained.
The consumer film market is not sustainable in the long run and in the near future film will be for serious film shooters. People like me (and I can't speak for you) don't care about branding. If I like a film and I will shoot a bunch to test it and not rely on marketing I will use it whether it may be made in China or the North Pole. Having a third party cranking out inferior Plus X won't do it for me whether the box is yellow or not if quality and consistency cannot be sustained.
eddyz
Newbie
I dont think you would expect film to maintain a steady rise. I believe within the past 3 years we already are seeing the peak area of Film sales thanks to Lomo, pop culture, and of course the the dedicated few of RF'ers and other film users.
The digital Camera age is too dominate. Like the poster above, I'm sure you will have a market for film, but it will be way too small in the long run to maintain the company, production cost and other fees (even if you opt out on all marketing cost).
im probably not correct, but hey, i'm just an urban planner lol
The digital Camera age is too dominate. Like the poster above, I'm sure you will have a market for film, but it will be way too small in the long run to maintain the company, production cost and other fees (even if you opt out on all marketing cost).
im probably not correct, but hey, i'm just an urban planner lol
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delft
Established
sepiareverb
genius and moron
A hundred years from now archeologists are going to discover millions of fuzzy, badly exposed, funny colored photos in China and spend years trying to figure out what the people at the beginning of the 21st century were thinking!
Kids will be wondering why their grandparents were such awful photographers.
And most will be wondering why their parents didn't take any pictures at all. Billions of jpgs are going to be long gone.
Pickett Wilson
Veteran
"Billions of jpgs are going to be long gone."
Which in the case of Flickr, maybe that's not a bad thing.
Which in the case of Flickr, maybe that's not a bad thing.
charjohncarter
Veteran
Kodak isn't selling right now so maybe they feel the numbers are good enough to stay with it. If there is a potential sale let's hope someone with vision buys.
In response to your Reuters article:
http://www.bloomberg.com/apps/news?...=japan&cid=1113396369&ei=I0TKRYD8GsvWHM-L5PEB
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Matus
Well-known
MISTAKE ! now He knows .... I believe he automatically searches internet for him being quoted
sjw617
Panoramist
$2 billion on a 10 years note + 15% interest is 230 million payment per year. Since the profit is only 100 million a year, there will be a 130 million shortfall. That leaves no money for marketing and licensing of the Kodak name.
Steve
Steve
vdonovan
Vince Donovan
Well now I know what it would be like to sit in a conference room at Goldman Sachs and pitch a junk bond deal! It's true, though, that the days of the zero-equity leveraged buyout are probably dead. Thank you all for digging into my semi-serious proposal.
There were indeed a few errors in my numbers, but the point I wanted to make is that Kodak's film division (which I have renamed in my head Kodak Fine Arts) makes $200 million per year in cold hard cash even in hard times. That number is no longer shrinking, but actually growing.
The other point I wanted to make is that the film business, though profitable, is not so valuable to Kodak Corporation because the gross margin is less than their digital business and unlikely to increase. Film is dragging down Kodak's overall gross margin. So they are unlikely to try to grow the business. They will just keep cutting and cutting.
So Kodak's not excited about $200 million profit per year at a 10% gross margin. But someone else might be. Warren Buffett owns a cowboy boot manufacturer, for heaven's sake, because it makes a tidy profit year in and year out. Hopefully Kodak film won't be bought by a shyster like Tom Petters who bought what was left of Polaroid and milked it dry, selling off the assets instead of trying to grow the company.
I sincerely believe that with proper investment in marketing and distribution the consumer film business could double, though not grow much more than that. Look at what Lomography has done: they are selling close to a billion dollars worth of over- priced crappy plastic cameras world wide. They did this entirely with marketing. I went into an art supply store the other day and was surprised to see a big line of Holga cameras for sale BUT NO FILM! Not one roll! Lomo also famously sells their product in clothing stores, but again you won't see film on sale. I think there are opportunities out there, not big ones, but enough to keep the brand alive.
Lomography is, in fact, getting into the film business with The Impossible Project, their re-start of Polaroid's SX-70 film factory. You can bet they'll be launching their new film in the hippest shops on the street, while Kodak continues to cut product lines.
Thanks again for all of your comments.
There were indeed a few errors in my numbers, but the point I wanted to make is that Kodak's film division (which I have renamed in my head Kodak Fine Arts) makes $200 million per year in cold hard cash even in hard times. That number is no longer shrinking, but actually growing.
The other point I wanted to make is that the film business, though profitable, is not so valuable to Kodak Corporation because the gross margin is less than their digital business and unlikely to increase. Film is dragging down Kodak's overall gross margin. So they are unlikely to try to grow the business. They will just keep cutting and cutting.
So Kodak's not excited about $200 million profit per year at a 10% gross margin. But someone else might be. Warren Buffett owns a cowboy boot manufacturer, for heaven's sake, because it makes a tidy profit year in and year out. Hopefully Kodak film won't be bought by a shyster like Tom Petters who bought what was left of Polaroid and milked it dry, selling off the assets instead of trying to grow the company.
I sincerely believe that with proper investment in marketing and distribution the consumer film business could double, though not grow much more than that. Look at what Lomography has done: they are selling close to a billion dollars worth of over- priced crappy plastic cameras world wide. They did this entirely with marketing. I went into an art supply store the other day and was surprised to see a big line of Holga cameras for sale BUT NO FILM! Not one roll! Lomo also famously sells their product in clothing stores, but again you won't see film on sale. I think there are opportunities out there, not big ones, but enough to keep the brand alive.
Lomography is, in fact, getting into the film business with The Impossible Project, their re-start of Polaroid's SX-70 film factory. You can bet they'll be launching their new film in the hippest shops on the street, while Kodak continues to cut product lines.
Thanks again for all of your comments.
Trius
Waiting on Maitani
How do you KNOW this? I mean, do you have any facts to back up this assertion?
degruyl
Just this guy, you know?
I do not. It is based on assumption.
If I am wrong, well, I am willing to accept someone else's argument if it makes sense.
BillBingham2
Registered User
Vince,
Great idea but there is perhaps one more flaw in it. You need to see how much of the volume of film is used for making movies and distribution. While it will take a few year (7 to 10) for all movie theaters to switch, lots are now starting to move digital. I think we see that now with the current batch 3D movies from Pixar. There are a lot more coming down the road. The prices for these movies covers the cost of glasses and the digital projectors (read here is the death blow). As more of these come out, more theaters will add more digital projectors. Digital lowers the cost of distribution (read to almost nothing, thank you Internet) which the folks in production land have been salivating over for several years. If you push say all major work to theaters via digital and not film what will happen to the Film Division at Kodak. I think they will be sucking Medon Ponds swamp water through two straws. There will still be some, but not a lot. This will also hurt the processing lines and you see the collapse/implosion. FPEG needs to worry about this happening much quicker as they missed the digital tidal wave a few years back.
It sucks and I could be wrong, but I do not think so. Sorry.
B2 (;->
Great idea but there is perhaps one more flaw in it. You need to see how much of the volume of film is used for making movies and distribution. While it will take a few year (7 to 10) for all movie theaters to switch, lots are now starting to move digital. I think we see that now with the current batch 3D movies from Pixar. There are a lot more coming down the road. The prices for these movies covers the cost of glasses and the digital projectors (read here is the death blow). As more of these come out, more theaters will add more digital projectors. Digital lowers the cost of distribution (read to almost nothing, thank you Internet) which the folks in production land have been salivating over for several years. If you push say all major work to theaters via digital and not film what will happen to the Film Division at Kodak. I think they will be sucking Medon Ponds swamp water through two straws. There will still be some, but not a lot. This will also hurt the processing lines and you see the collapse/implosion. FPEG needs to worry about this happening much quicker as they missed the digital tidal wave a few years back.
It sucks and I could be wrong, but I do not think so. Sorry.
B2 (;->
victoriapio
Well-known
I was the marketing director for two bank holding companies that bought a lot of local banks so I know a bit about M&A. I am also a photographer which in my case means a significant part of my business brain has been fogged by too much time breathing fixer in a poorly ventilated dark rooms . Here's my .02 worth:
1. Kodak probably makes more on the film division than stated even though as has been very accurately noted, it is becoming less significant each year. If a business division is not growing fast enough to offset increased operation costs, then bascially it is dying. It WILL cost more and more to make film each year (amazing how costs rarely drop) so the profit margin will drop.
2. "the point I wanted to make is that Kodak's film division (which I have renamed in my head Kodak Fine Arts) makes $200 million per year in cold hard cash even in hard times. That number is no longer shrinking, but actually growing." Do not believe for one second that their film division is growing at any significant level. Kodak would probably love for someone to buy their film division and the last line of that quote is typical "annual report rubbish." Of course they will broadly state that "all divisions are growing" and they may be factually correct. But a 1% growth rate does not cover the increased cost of annual operations so the margins will continue to drop (I have not looked at Kodak numbers but I assume that film division USED to have margins much higher than 10% - they had to have in order to keep the division around this long.)
3. Debt - there is no way to get any and even if you could, you would be laughed out of every commercial bank lending office in the country. Bankers know immediately if a "deal" will work and study the numbers only when a deal looks good. Unless you can claim this is part of Obama's stimulus package, forget any debt for the Kodak film division. No lending institution is risking their capital and raising their loan reserves on this puppy.
4 A). Spin off the film division - might work, might make this division more "saleable" but then the numbers as a stand alone company become more revealing - how high were profit margins, how much are operating costs increasing every year?
4 B) . Stock swap - perhaps the only way something like this can ever be done is through a stock swap with no capital involved. This is the way many M&As are done with the buying company "paying" for the purchase with their company stock." There are exceptions of course and this is a "small" transaction in business terms these days. But with "film" being relegated to a very "nich" product for the masses, any company exploring the purchase of the Kodak film division better have a lot of unissued stock. The beauty of a stock swap is there are no tax consequences for the seller (at least there were not back in my M&A days, I understand the laws may have changed). And stock swaps do dilute the buyers stock a bit, but typically the price for the transaction is a pretty accurate reflection of what a company is worth ("goodwill" aside of course)
5. Desperate RFFers aside (and I am assuming there is no one here who has assets in the 10-15 BILLION dollar range, which is probably what it would take to pull off a leveraged buyout of even this small film division), who would seriously consider buying the Kodak film division? Sure someone like Warren Buffet and his Berkshire Hathaway company might take a look at the numbers but I doubt they stop laughing for a while when they looked at the growth and profit of the Kodak DIGITAL division(s). That is where the growth and increased profit margins lie. I am positive that all RFFers know this fundamental business ideal: the growth to offset increasing operational costs and expand profit margins can only be found in (at least in a business like Kodak's) through growing markets - not a market that is steady or perhaps dropping from a "marketability" view point.
6. I still have not answered the question - who would buy the Kodak film division? Sure, a film freak who invested in Microsoft thirty years ago could probably buy it in a heartbeat - but this seems very unlikely. What about another film company? Are there any photography companies large enough to buy Kodak and if so, willing to do it? And would the Kodak film product line change if a competing company bought it? Hard to say and again, it seems unlikely that a company that competes with Kodak film would be willing to buy it .
7) The fact is, other than the users of film, I am sorry to say there is very little business incentive for any company to purchase this division. The very best thing for the Kodak film division COULD be for it to remain a small, profitable division that can hold its own until it reaches a point where a company already in the photography business can afford it. The risk is, as has been expressed by Kodak and many earlier posts on this thread, those kinds of divisions are not well liked at the corporate level these days. On the other hand, what if the Kodak film division was eliminated? Would that strengthen the sales of competeing film companies?
8) I know many of you use film and would rather die than use digital imaging, but you know you are a very small part of the photography landscape these days. I am not an economist or business prognosticator but I think the end of Kodachrome is typical of what the future holds for film. K64 was my media back in my professional photography days and while I had a very strong emotional reaction to its demise, I can certainly understand the business decision behind it. Unfortunately in today's business world, it is all about the "business decision."
9) I hope I am wrong and someone announces the purchase of the film division within five minutes of posting this. Maybe someone here needs to talk to the guy from Virgin Aiirways? Good luck "filmers."
. Here's my .02 worth:1. Kodak probably makes more on the film division than stated even though as has been very accurately noted, it is becoming less significant each year. If a business division is not growing fast enough to offset increased operation costs, then bascially it is dying. It WILL cost more and more to make film each year (amazing how costs rarely drop) so the profit margin will drop.
2. "the point I wanted to make is that Kodak's film division (which I have renamed in my head Kodak Fine Arts) makes $200 million per year in cold hard cash even in hard times. That number is no longer shrinking, but actually growing." Do not believe for one second that their film division is growing at any significant level. Kodak would probably love for someone to buy their film division and the last line of that quote is typical "annual report rubbish." Of course they will broadly state that "all divisions are growing" and they may be factually correct. But a 1% growth rate does not cover the increased cost of annual operations so the margins will continue to drop (I have not looked at Kodak numbers but I assume that film division USED to have margins much higher than 10% - they had to have in order to keep the division around this long.)
3. Debt - there is no way to get any and even if you could, you would be laughed out of every commercial bank lending office in the country. Bankers know immediately if a "deal" will work and study the numbers only when a deal looks good. Unless you can claim this is part of Obama's stimulus package, forget any debt for the Kodak film division. No lending institution is risking their capital and raising their loan reserves on this puppy.
4 A). Spin off the film division - might work, might make this division more "saleable" but then the numbers as a stand alone company become more revealing - how high were profit margins, how much are operating costs increasing every year?
4 B) . Stock swap - perhaps the only way something like this can ever be done is through a stock swap with no capital involved. This is the way many M&As are done with the buying company "paying" for the purchase with their company stock." There are exceptions of course and this is a "small" transaction in business terms these days. But with "film" being relegated to a very "nich" product for the masses, any company exploring the purchase of the Kodak film division better have a lot of unissued stock. The beauty of a stock swap is there are no tax consequences for the seller (at least there were not back in my M&A days, I understand the laws may have changed). And stock swaps do dilute the buyers stock a bit, but typically the price for the transaction is a pretty accurate reflection of what a company is worth ("goodwill" aside of course
)5. Desperate RFFers aside (and I am assuming there is no one here who has assets in the 10-15 BILLION dollar range, which is probably what it would take to pull off a leveraged buyout of even this small film division), who would seriously consider buying the Kodak film division? Sure someone like Warren Buffet and his Berkshire Hathaway company might take a look at the numbers but I doubt they stop laughing for a while when they looked at the growth and profit of the Kodak DIGITAL division(s). That is where the growth and increased profit margins lie. I am positive that all RFFers know this fundamental business ideal: the growth to offset increasing operational costs and expand profit margins can only be found in (at least in a business like Kodak's) through growing markets - not a market that is steady or perhaps dropping from a "marketability" view point.
6. I still have not answered the question - who would buy the Kodak film division? Sure, a film freak who invested in Microsoft thirty years ago could probably buy it in a heartbeat - but this seems very unlikely. What about another film company? Are there any photography companies large enough to buy Kodak and if so, willing to do it? And would the Kodak film product line change if a competing company bought it? Hard to say and again, it seems unlikely that a company that competes with Kodak film would be willing to buy it .
7) The fact is, other than the users of film, I am sorry to say there is very little business incentive for any company to purchase this division. The very best thing for the Kodak film division COULD be for it to remain a small, profitable division that can hold its own until it reaches a point where a company already in the photography business can afford it. The risk is, as has been expressed by Kodak and many earlier posts on this thread, those kinds of divisions are not well liked at the corporate level these days. On the other hand, what if the Kodak film division was eliminated? Would that strengthen the sales of competeing film companies?
8) I know many of you use film and would rather die than use digital imaging, but you know you are a very small part of the photography landscape these days. I am not an economist or business prognosticator but I think the end of Kodachrome is typical of what the future holds for film. K64 was my media back in my professional photography days and while I had a very strong emotional reaction to its demise, I can certainly understand the business decision behind it. Unfortunately in today's business world, it is all about the "business decision."
9) I hope I am wrong and someone announces the purchase of the film division within five minutes of posting this. Maybe someone here needs to talk to the guy from Virgin Aiirways
? Good luck "filmers."