Eastman Kodak – An example of significant destruction of shareholder value

On January 19^th 2012, Eastman Kodak filed for chapter 11 Bankruptcy protection, over 130 years after it was first founded. The recent demise of this company is an explicit example of destruction of shareholder value and finally answered the question of whether this former global pioneer in analogue photograph technology could exist and adapt successfully in the digital era. Following the announcement to file for bankruptcy, Kodak’s share price dropped to an all-time low of 36 cents per share and was promptly suspended from trading. Despite inventing the world’s first digital camera in 1975, Kodak never managed to remain competitive in this field. Kodak traditionally made most of its money from selling photography film, and were unable to keep up with competitors who were quicker to adapt to the digital era. This hesitation has ultimately decided the company’s fate. The company has employed many different strategies over the years, including focusing on home printing technology. However, the share price has continued to fall, resulting in bankruptcy being suggested by CEO Antionio Perez as a litigation strategy. Perez argues that bankruptcy would help Kodak maximize the value of patents related to digital imaging, which are used in virtually every modern digital camera, smartphone and tablet, according to Kodak.

This case is a shocking example of what could happen when a company fails to adapt to the faster pace and lower cost structures of the digital world. Other examples include Blockbuster videos failure to anticipate the introduction of online video rental services and have suffered greatly from competition from companies such as Netflix and Lovefilm. When considering the value creation and the value action pentagon, this could also be seen as a relevant case. Despite Kodak attempting to adopt new strategies such as focusing on home and commercial printing technology, they have failed to make much of an impact and have drastically lost their position in their core market of photograph technology.

In conclusion, Kodak is just of many examples of a company that can be looked at when considering the subject of shareholder value creation/destruction.