While it is very difficult to kill a company, businesses can and do perish. It often takes time, but it does happen.
For several years now, Eastman Kodak (EK), the purveyor of film for cameras has been on a slow death march that has been fascinating to watch. The digital camera business absolutely destroyed this company, and they have been fumbling for a solution since its advent.
They’ve tried to adapt by capitalizing on its brand equity, but slapping its logo on a digital camera does not guarantee success. Its film division has been in a decline that doesn’t appear to be stopping any time soon.
Add in a global recession paired with a strengthening dollar, and the company finds itself in the midst of the twisting steel and rubble of a major train wreck.
Today, the company announced that it was withdrawing guidance for 2008. Code blue, code blue, code blue!
With just a few weeks left in the quarter, EK has no idea how bad results will be? Something seems a bit fishy here. At a minimum, operating performance can be expected to be horrible.
After all, what would it take for a company to pull guidance? It must be quite bad otherwise they would at least offer some idea of what to expect on a revenue and profit basis.
The stock is trading down on the news, but not as much as one would expect. That may be a result of a stock that is already down hard.
Shares of EK have lost more than 50% of their value since the beginning of September. Considering shares had fallen from $20 to $15 since the start of the year, losing another 50% is a big hair cut.
Does the approximate $6.50 per share price today fairly represent the true value of EK?
Without the guidance, it’s hard to say. Personally, I would expect this stock to be trading below $5 in the very near future. The trigger for further losses will be actual results that look to be quite poor.
Can the company survive from this mess? Not in my opinion. EK is dying and has been for some time. This is the latest drama in that story.
I wouldn’t stick around for the conclusion unless you just love to watch train wrecks. (For details on 10 Top Stocks to Buy Now, click here.)
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.
