Eastman Kodak Company: Restructuring a Melting Point Harvard Case Solution & Analysis

Eastman Kodak Company: Restructuring a Melting Point Case Solution

SWOT Analysis of Kodak:

SWOT analysis will also help in developing a better understanding about company’s core strengths, underlying opportunities, current threats and weakness. Such an analysis will provide a guideline that how these strength and opportunities can be utilized in an effective manner to bring the company back from its declining state to a growing phase.

Strength

• Kodak is a renowned brand and is known for its excellence and innovation in the camera industry.
• Responsible for introducing breakthrough products with high sustainability, productivity and quality.
• Kodak is known to be a global pioneer of photographic materials and digital imaging services.
• Focusing on few business lines to effectively manage it.

Weakness

• Company took sufficient time to transform and align itself with the evolving technology. Due to which the company suffered from a great loss, the market share of the company declined by a significant margin because of the shift in the customer demand from analog to digital technology.
• The company didn’t expand or explore other countries outside Europe due to which profit margins of the company did not grow and its brand name remained limited to its home countries.
• Bankruptcy affected the name of the brand negatively and weakened its brand image.

Opportunities

• With a rapid change in technology, the early adaptation of the new emerging technology will provide the company with an edge to compete against its competitors.
• Asian markets have huge potential; Kodak can explore this market to expand its reach globally.
• It can incorporate 3D printing technology that will leverage the position of the company in 3D printing market.
• The company can build strategic alliances with different industries to come up with new and innovative products in the market that will help the company in recapturing its lost market share.
• Mobile telephony is an emerging market and is one of the major competitors of digital imaging industry. Focusing on this market can help the company to revamp its financial position.

Threats

• Intense competition and rapid shift in technology pose major threats to the existence of the company. It is one of the key reasons for a gradual decline in the market share of the company.

The Reorganization Plan:

As per the prosed plan for the company, new credit needs to be acquired to retire its previous loans and raise capital by selling common shares in the market. It is anticipated that with the help of such a reorganization plan, Kodak will be able to have around $700 million in cash, around $1 billion worth of loans reflecting on its balance sheet and 41.7 millions of share outstanding with a share price of around $5 - $15. Also, it is worth noting that the management of Kodak has not been very strong and efficient in analyzing the future trends in the market nor they have been able to provide reasonable analysis about future outlook of the company therefore, investors and creditors might have concerns about the true value of the assets of the company. But since prudent due diligence is being conducted by GSO therefore it can be claimed that the future outlook for Eastman Kodak Company seems very positive. With respect to future outlook of Kodak, GSO is obliged to offer 34 million new common shares at a price of $11.94 per share. It can confidently be claimed that the enterprise value of the firm will grow substantially over the years, hence providing promising returns over the shares subscribed. In case, if the offering will be under subscribed than GSO will back the subscription by purchasing the new shares. It is expected that the share price will go beyond the mark of $15 per share but considering an optimistic approach, it can be claimed that the share price will remain in the vicinity of $5 - $15 after subscription.

Although, financial advisor of Kodak analyzed that the enterprise value of the firm will be around $1.5 billion to $2 billion after reorganization but our analysis show that currently, the true value of the assets are translated to be around $350 million which doesn’t seem sufficient to back the claims of the creditors but it is worth noting that the future prospects of the company seems very delightful.

Table 1.1: Enterprise Value of Kodak

This can be proved by the fact that the Enterprise value-to-Sales ratio shows a value of only 0.52 which means that the company is currently undervalued and investing in such a company can be a good bet for the investors.

Table 1.2: Enterprise value to Sales ratio

This ratio is not only undertaking the true market value of debt of the company but it is also reflecting the value of its assets and the future prospects. Currently, Kodak is emerging out of the crisis which is why it is reflecting a low enterprise value and this claim is backed by EV-to-sales ratio. This ratio also shows that how much it is going to cost an investor or creditor for every unit of sales revenue.

The financial statements are also quite evident since net losses are brought down from hundreds of millions to only negative $56 million during 2013 and it is anticipated that the bottom-line of the company will start reflecting positive income for the company from 2015 and onwards. In the wake of such an anticipated future prospects of the company, GSO is backstopping the proposed equity offering...........

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