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Troubled transformation: As Kodak attempts to remake itself, doubts about its future grow

Rochester Business Journal
December 30, 2011

Eastman Kodak Co.'s ongoing struggles ranked as the top business story of 2011 for Rochester Business Journal readers.
The story of Kodak's stock falling below $1 a share amid speculation about the company's future was selected in 33 percent of some 700 responses to a recent RBJ Daily Report Snap Poll, followed closely by Windstream Corp.'s acquisition of Paetec Holding Corp.
"I'm not surprised Kodak was voted the top story of the year," said George Conboy, president of local stock brokerage and financial services firm Brighton Securities Corp. "Like me, I think many people in Rochester are stunned by what has happened at Kodak."
In late September, Kodak's stock fell as low as 54 cents a share after media outlets such as Bloomberg and the Wall Street Journal reported that the company was considering bankruptcy. Kodak issued a statement saying it had no intention of filing for bankruptcy and was engaging financial and legal advisers as it went through a transformation.
Kodak's stock jumped back above $1 a share in October but fell below $1 again in December. It was trading at midweek at 64 cents a share.
Ellen Rosen, vice president of communications and membership for the Rochester Business Alliance Inc., said many residents of the area have ties to Kodak, which likely contributed to it being the top story.
"I'm not necessarily surprised," Rosen said. "A lot of local residents have either worked at Kodak, have family or friends that have worked there, or they are shareholders. That would have made it a big story that affects a lot of people."
In November, Kodak posted a larger third-quarter loss than expected. Last week, the company announced a new president and a deal to sell its gelatin business. Kodak announced Tuesday that two directors had resigned.
Conboy said the company's ongoing trouble also may wind up being one of the biggest stories of next year, if not the biggest.
"I think 2012 is the year Kodak files bankruptcy," Conboy said. "It would mean a reorganization for the company. It doesn't mean the people who still work there will be told to go home and not come back, but it may allow the company to reduce costs and overhead."
Rosen was a little more optimistic.
"It's hard to know where it will go," she said. "Kodak insists they have a plan, so we're waiting to see. We're going to keep our faith in them until they tell us otherwise."
Though there has been much criticism of Kodak chairman and CEO Antonio Perez, Conboy said he thinks it is too soon to say that blame for the company's fate rests with Perez. Yet some poll participants were much harsher. One respondent, Rick Bradley, compared Perez to Bernard Madoff.
"His inept management has poisoned the well so badly that no other company will even give Kodak a glance," Bradley said of Perez. "What a shame. I don't think any other issue even comes close."
Chili resident Devon Michaels said the entire story saddened him, commenting: "It's pretty hard to say that the likely collapse of the company that basically gave birth to this city isn't the biggest story of the year."
Windstream's acquisition of Paetec received 27 percent of the vote in the RBJ readers poll. The acquisition was an all-stock transaction valued at some $2.3 billion that gave Paetec shareholders a payout of approximately $860 million.
The transaction sparked speculation that Windstream would abandon Paetec's plan to build a downtown headquarters at the Midtown Plaza site. However, Windstream and the city ultimately cut a deal to have the company move 335 local workers into a smaller version of the planned downtown facility.
"I think the downsizing of Paetec and then the uncertainty was a huge concern economically for the city," poll respondent Kathy Keady commented. "They counted on their tenant in regards to redeveloping space."
Windstream's acquisition of Paetec scored high with the RBJ's team of 13 editorial staff members, ranking as the top story in the annual poll of staffers.
One of the brighter stories of the year was Rochester's ranking as No. 1 statewide in job gains, which received 18 percent of the vote, placing third in the RBJ readers' poll.
"Job growth is perhaps the most important component of the economic recovery," commented Arnold Boldt, managing partner of the Arnold-Smith Associates career consulting firm. "Rochester's track record in this key area bodes well for our long-term economic health."
The University of Rochester's continued growth was picked by 4 percent of readers. In April, the university opened the Saunders Research Building, a $60 million science facility. And in October, UR president Joel Seligman announced a $1.2 billion goal for the largest capital campaign in the university's history.
Other top stories included First Niagara Financial Group Inc.'s agreement to buy more than 30 branches of HSBC Bank USA N.A., Thomas Golisano's sale of the Buffalo Sabres, and Manning & Napier Inc. going public.
Conboy said he thought Manning & Napier's IPO was one of the more under-the-radar stories of the year. The company went public in November, netting an estimated $138.1 million. The amount was less than the company's original target but still a positive outcome, according to analysts.
"I know it landed a bit below expectations, but I think down the road people will look back at that story and see it as a pretty big deal," he said.
Still, Conboy said Kodak's storied history is ultimately what made the company's troubles stand out as the top story in 2011.
"It's a major event," said Conboy. "You mention Kodak, and people know exactly what it is all over the world. It's iconic. I'm shocked it has come to this."

12/30/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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