vdonovan
Vince Donovan
Discontinuing 320 TXP in 220? That was the last straw. I crunched some numbers and have figured out that not only can we fix the situation ourselves, we can become rich in the process.
Kodak's film division really SHOULD be sold or spun off as a separate company. While film is indeed profitable for Kodak, it is now and always will be a small part of their business. In fact, it is dragging Kodak down. While film is 22% of Kodak's sales, it delivers only 12% of Kodak's profits.
Kodak digital has a gross margin of over 30%, while film is only 10%. Without the film division, Kodak's overall gross margin would almost double.
The profitability of film is unlikely to increase since they have already wrung every possible efficiency from that operation. Kodak would be wiser to invest in their digital division, which is now returning a big profit and growing quickly.
So film is a turkey as part of Kodak, but if it was an independent company it would be quite attractive: $2 billion in global sales with a gross margin of almost 10%. Kodak reports "sequentially improved demand across all traditional businesses". So with absolutely no marketing and terrible distribution, film is cranking out $200 million in cash every year and growing. I think with good marketing (a la Lomography) the film business could double over the next ten years.
So here's the pitch: 50 Rangefinder Forum members (perhaps together with some of the maniacs over at APUG) get together to perform a leveraged buyout of the company. We offer Kodak $2 billion, or about 10 years worth of profits. Kodak gets a bump to the balance sheet and an instant improvement to their gross margins.
The $2 billion is financed by a 10 year note at 15% interest. The payments on the note are about $100 million per year, which we pay out of the film division's annual cash flow. We then use $50 million of the remaining annual cash for new sales and marketing. The remaining $50 million per year we distribute to ourselves, the original 50 investors, for administrative expenses.
As rapacious as this plan sounds, I bet it really would grow the company. $50 million is a LOT of marketing, probably ten times what Kodak is doing now. I honestly think film sales could double over ten years--look how much Lomography has grown: they are a roughly $1 billion company now, and they must keep selling cameras to people who already have them. Film customers just keep on consuming.
Of course once film sales and profits double, we investors would be able to double our administrative compensation to $2 million per investor per year.
Who's in?
Kodak's film division really SHOULD be sold or spun off as a separate company. While film is indeed profitable for Kodak, it is now and always will be a small part of their business. In fact, it is dragging Kodak down. While film is 22% of Kodak's sales, it delivers only 12% of Kodak's profits.
Kodak digital has a gross margin of over 30%, while film is only 10%. Without the film division, Kodak's overall gross margin would almost double.
The profitability of film is unlikely to increase since they have already wrung every possible efficiency from that operation. Kodak would be wiser to invest in their digital division, which is now returning a big profit and growing quickly.
So film is a turkey as part of Kodak, but if it was an independent company it would be quite attractive: $2 billion in global sales with a gross margin of almost 10%. Kodak reports "sequentially improved demand across all traditional businesses". So with absolutely no marketing and terrible distribution, film is cranking out $200 million in cash every year and growing. I think with good marketing (a la Lomography) the film business could double over the next ten years.
So here's the pitch: 50 Rangefinder Forum members (perhaps together with some of the maniacs over at APUG) get together to perform a leveraged buyout of the company. We offer Kodak $2 billion, or about 10 years worth of profits. Kodak gets a bump to the balance sheet and an instant improvement to their gross margins.
The $2 billion is financed by a 10 year note at 15% interest. The payments on the note are about $100 million per year, which we pay out of the film division's annual cash flow. We then use $50 million of the remaining annual cash for new sales and marketing. The remaining $50 million per year we distribute to ourselves, the original 50 investors, for administrative expenses.
As rapacious as this plan sounds, I bet it really would grow the company. $50 million is a LOT of marketing, probably ten times what Kodak is doing now. I honestly think film sales could double over ten years--look how much Lomography has grown: they are a roughly $1 billion company now, and they must keep selling cameras to people who already have them. Film customers just keep on consuming.
Of course once film sales and profits double, we investors would be able to double our administrative compensation to $2 million per investor per year.
Who's in?
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