1. Integrated Company Analysis
Fall, 2009
For over one hundred years, Eastman Kodak Company has provided imaging
products to consumers, earning brand equity through innovation. Today, Kodak
struggles with declining revenue and steep restructuring costs as it transitions to
the digital imaging market.
Alejandro Castano Joe Czechowicz Troy Golden Matt Johnson Lindsay Kruger
Wisconsin School of Business
975 University Ave
Madison, WI 53706
608-262-1550

2. Contents
Contents .................................................................................................................................................................................. 2
Executive Summary ................................................................................................................................................................ 4
Company Analysis .................................................................................................................................................................. 5
Organizational Structure ..................................................................................................................................................... 5
Financial Analysis ............................................................................................................................................................... 5
Performance Indicators ................................................................................................................................................... 5
Quality of Financial Statements ...................................................................................................................................... 6
Financing and Capital Structure ...................................................................................................................................... 7
Valuation ......................................................................................................................................................................... 7
Kodak‘s Current Marketing Strategy .................................................................................................................................. 8
Consumer ........................................................................................................................................................................ 8
Positioning ...................................................................................................................................................................... 8
Product ............................................................................................................................................................................ 9
Price ................................................................................................................................................................................ 9
Placement ...................................................................................................................................................................... 10
Promotion ...................................................................................................................................................................... 10
Recommendations ................................................................................................................................................................. 12
Appendix ............................................................................................................................................................................... 14
Exhibit 1 – Products Analysis ........................................................................................................................................... 14
Digital Cameras............................................................................................................................................................. 14
Printers .......................................................................................................................................................................... 15
Digital Picture Frames .................................................................................................................................................. 16
Photo Storage ................................................................................................................................................................ 16
Exhibit 2 – ―It‘s time to smile‖ Campaign ........................................................................................................................ 18
Exhibit 3 – Competitor Endorsements .............................................................................................................................. 22
Exhibit 4 – Economic Value Pricing................................................................................................................................. 22
Exhibit 5 – Kodak Product Pricing ................................................................................................................................... 22
Exhibit 6 ............................................................................................................................................................................ 23
Point And Shoot Models: Rankings And Price ............................................................................................................. 23
Compiled from ConsumerReports.org .......................................................................................................................... 23
Exhibit 7 – Competitor Business Descriptions ................................................................................................................. 25
Canon Inc. ..................................................................................................................................................................... 25
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3. Fujifilm Holdings Corp. ................................................................................................................................................ 25
Hewlett-Packard Co. ..................................................................................................................................................... 25
Ricoh Co. Ltd. ............................................................................................................................................................... 25
Sony Corp. .................................................................................................................................................................... 26
Xerox Corp.................................................................................................................................................................... 26
Nikon Corp.................................................................................................................................................................... 26
Olympus Corp. .............................................................................................................................................................. 27
Lexmark International Inc. ............................................................................................................................................ 27
Seiko Epson Corp.......................................................................................................................................................... 27
Exhibit 8 – Profitability Scenario Analysis....................................................................................................................... 28
Exhibit 9: Comparison of accounting methods ................................................................................................................. 30
Exhibit 10: Operating cost breakdown............................................................................................................................. 31
Exhibit 11 - Cash Conversion Cycle ................................................................................................................................ 32
Exhibit 12 – EK Pro Forma Financial Statements ............................................................................................................ 34
Exhibit 13 – CDG Pro Forma Financial Statements ......................................................................................................... 35
Exhibit 14 – FPEG Pro Forma Financial Statements ........................................................................................................ 36
Exhibit 15 – GCG Pro Forma Financial Statements ......................................................................................................... 37
Exhibit 16 – Segment Valuations and Key Assumptions ................................................................................................. 38
Exhibit 17 – Regression Analysis of Traditional Sales Lines ........................................................................................... 39
Exhibit 18 – Sensitivity Analysis of Stock Price .............................................................................................................. 43
Exhibit 19 – Cash Benefit of Financing Transactions ...................................................................................................... 44
Works Cited .......................................................................................................................................................................... 45
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4. Executive Summary
Eastman Kodak Co. was founded in 1892 by George Eastman and offers imaging products for leisure,
commercial, entertainment, and scientific purposes. Traded on the New York Stock Exchange (symbol: EK), the
company reported over $9 billion in revenue and $9 billion in assets in FY08. Kodak is organized along three segments:
the Graphic Communications Group (GCG); the Film, Photofinishing, and Entertainment Group (FPEG); and the
Consumer Digital Imaging Group (CDG). Kodak‘s history is one of innovation, but the company was slow to react to the
digital revolution. Kodak has struggled to overcome this legacy ever since.
Through our due diligence, we have uncovered that Kodak must improve gross margins to become profitable in
2010. Our sensitivity analysis shows that sales growth alone will not lead to profitability. We have identified a target
gross margin of 27.5% to become profitable in 2010.
Kodak entered into two financing transactions over the past two months involving convertible debt and warrants.
These transactions allowed Kodak to raise almost $700 million in cash, while saving around $35 million per year in
interest. In exchange for the savings, existing shareholders will potentially give up 25% of the equity value. Kodak also
continues to sell significant assets and intellectual property rights, including its OLED business, a potential next-
generation flat-panel display technology that Kodak pioneered over the last couple of decades (Kodak, 2009).
Kodak positions itself as the user-friendly choice for amateur users of imaging products. The company‘s product
attributes detract from this position. In general, Kodak products are priced below the competition. Kodak‘s lower price,
though offering a benefit to some consumers, signals inferior quality to the market. Kodak‘s placement strategy employs
wide market coverage, ensuring easy access for consumers. Presently, Kodak does not direct consumers to preferred
channels. Kodak recently launched an integrated, multi-media marketing campaign. The campaign touches on multiple
product lines, rather than emphasizing an ‗energizer‘ product.
The following are our key recommendations: (1) redesign Kodak‘s marketing communication message to position
it as the premier provider of imaging solutions that connects the consumer with their loved ones; (2) through marketing
communications, walk the consumer from image capturing, through storage, to sharing, allowing them to process each of
Kodak‘s product offerings; (3) increase marketing focus on digital cameras to leverage brand equity (reposition); (4)
increase prices on digital cameras.
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5. Company Analysis
Organizational Structure
Eastman Kodak is an international corporation with over 24,000 employees, over $9 billion in annual sales
(FY08), and over $9 billion in assets (FY08).
The company is organized along three segments: the Graphic Communications Group (GCG); the Film,
Photofinishing, Entertainment Group (FPEG); and the Consumer Digital Imaging Group (CDG). Thirty-nine percent of
Kodak‘s revenue comes from the GCG segment, which provides products and services to businesses with large scale
printing operations. Thirty-one percent of Kodak‘s revenue comes from the FPEG segment, which provides traditional
photographic products and services to consumer, professional, and industrial markets. Thirty percent of Kodak‘s revenue
comes from the CDG segment, which provides digital consumer products.
Kodak began in the late nineteenth century with George Eastman‘s advance in dry plate technology, which
allowed photography to become an amateur pursuit. Since then, Kodak has continued to excel in technological
innovation. The company issued over 19,000 U.S. patents between 1900 and 1999. In 1935, Kodak introduced
Kodachrome film, the first commercially successful amateur color film. NASA relied on a Kodak camera to take photos
on the moon and transmit them to earth. Also, Kodak invented the first digital camera in 1975 (Kodak, 2009).
Kodak reacted slowly to the digital revolution. Since the takeoff of digital cameras, Kodak has seen revenues
plummet from $15 billion to $9.4 billion (Butcher, 2009). Kodak has cut 40,000 jobs over the last five years, and plans to
eliminate 3,500 to 4,500 in 2009 (Dobbin, 2009). Since 2003, Kodak has sought to meet this challenge with robust
restructuring programs. Approximately 80% of Kodak revenue is from new products and services developed within the
last five years (Butcher, 2009). Approximately 60% of Kodak employees have been there less than four years (Butcher,
2009).
Financial Analysis
Performance Indicators
Kodak faces the challenge of high restructuring costs and declining demand for its digital products, while trying
to redefine its organizational structure and brand name. On top of company-specific problems, Kodak faces a stiff macro-
economic headwind, as consumers continue to watch their spending on luxury items. To combat these problems, Kodak
has cut costs via layoffs and reductions in R&D expenditures, removed dividend payments to common stockholders and
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6. targeted its cash conversion cycle. In the near term, Kodak appears to be poorly positioned to handle an extended
economic contraction, and must act immediately to generate additional revenues and profits.
Negatives for FY08 vs. Competitors
Revenues: Kodak experienced revenue growth (pro-forma) of -2.5% and -8.6% in FY07 and FY08, respectively.
The median competitor revenue growth was 6.7% and -8.6% in FY07 and FY08, respectively. We attribute the quicker
revenue decline to the company‘s inability to resonate with consumers.
Rapidly declining gross margins. Since Kodak introduced its ―digital plan‖ in 2003, gross margins have declined
sharply from a high of 36% to the current low of around 20% (23% FY08 vs. competitor median of 36%). The decline in
margins is a pressing issue. We believe our marketing recommendations give Kodak the best chance of survival.
Return-on-Equity (Dupont): Kodak has seen its ROE go from 24.5% in FY02 (vs. 6.6% for competitors) to -
44.4% in FY05 (vs. 10.4% for competitors), to -36.4% (vs. 0.6% for competitors) in FY08. One of the distinguishing
detractors comes from Kodak‘s above median equity multiplier at 5.4x (vs. 2.7x for competitors). As the industry and
economy deteriorated, Kodak suffered from higher financial leverage relative to its peers (3-yr average of 6.4x vs. 2.7x
for competitors) that accelerated the decline of profitability.
Positives for FY08 vs. Competitors
Cash Conversion Cycle (CCC): Kodak has reduced its cash conversion cycle to -5 days for FY08, versus a
competitor median of 82 days (FactSet Research Systems, 2009). Kodak accomplished the improvement in CCC through
extensions of terms on accounts payable, while maintaining steady inventory and days of sales outstanding.
Lean operating costs: Kodak has been successful in cutting SG&A costs as a percentage of sales. By reducing its
workforce, Kodak expects future cost savings of over $300 million. Current operating costs (ex-restructuring and goodwill
write-offs) of 22% are well below Canon (35%), Fujifilm (35%) and Nikon (31%). If Kodak can survive the economic
contraction and continue to operate at current levels in comparison to its competitors, we believe the company can survive
and return to profitability.
Quality of Financial Statements
Kodak reports under US GAAP (Exhibit 9). Inconsistency in Kodak‘s financial reports inhibits the ability to
serially compare and forecast financial performance. Through our due diligence process, we discovered that Kodak is
more aggressive (8%) than Canon in respect to estimating expected returns on assets (6.5%) of pension plan obligations.
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7. Restatements: Kodak restated financial statements in 2003 and 2004 due to mistakes in reporting income taxes,
accruals for pensions and other post-retirement benefits due to the rapid turnover (firing) of 15,000 workers. The
restatement reduced reported earnings by $85 million (effect from income tax error - $56 million, effect from pension
errors – $29 million), decreased retained earnings and decreased cash flow from operations.
Reclassifications: Continuous restructuring of the company prevents proper historical comparisons beyond three
years. The reclassifications also introduce discrepancies between segment breakdowns and total firm numbers.
Change in useful life of assets: In the first quarter of 2008, the company performed an updated analysis of
expected useful lives on its traditional film and paper business. This analysis resulted in an increase in useful lives, which
in turn will result in decreasing depreciation expenses ($107 million), increasing net income, increasing retained earnings
and increasing assets in the future.
Impairment of goodwill: In 4Q08, Kodak re-evaluated all of its business segments with an increased WACC
between 18.5% and 23.0% to reflect the rapidly deteriorating environment. Due to the estimated future cash flows being
less than the overall cost of the GCG segment, Kodak reported a pre-tax, non-cash $785 million impairment charge.
Financing and Capital Structure
Many of Kodak‘s financing decisions are being dictated by its weak financial position. The company is relying on
convertible securities and warrants in order to secure debt financing at bearable costs (around 8.5%, Exhibit 19) while
giving up significant upside of around 25% of common stock if the company recovers. Equity financing is not an option
due to the low market value of Kodak‘s common stock relative to its operating and financing cash needs. It has decided to
cut its dividend and discontinue stock repurchases after spending over $450 million of needed cash in 2008.
Valuation
Discounted Cash Flow Analysis
We valuate Kodak‘s stock at $5.32. This makes the share price of $4.40 as of 12/11/09 slightly undervalued. The
DCF analysis was performed using a two-stage model in which we estimated the cash flows for Kodak‘s three business
segments, CDG, FPEG and GCG, through 2018, and then calculated a terminal value based on assumed long-term growth
rates (Exhibits 15).
Kodak has re-organized its business segments repeatedly, making it difficult to compare revenues and costs over a
long period and establish any significant trend at the segment level. Second, the business is undergoing rapid changes as a
result of the technological shift to digital products, which has increased volatility and made it very difficult to establish
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8. any kind of even a short-term trend. We ended up using a regression model of Kodak‘s overall revenues with several
factors related to their traditional business segments to predict revenues going forward for GCG and FPEG, which most
closely resemble Kodak‘s traditional combined business lines since 1990 (Exhibit 16). Finally, we believe that our WACC
calculation could be undervaluing Kodak‘s risk based on management expectations for the cost of capital (Kodak, 2009).
Exhibit 17 contains a sensitivity table of the stock value based on WACC and long-term growth rates.
WACC
We estimated a weighted average cost of capital (WACC) of 15.1% for the overall company based on a risk-free
rate of 3.2%, and a market risk premium of 7.4%1 (Kavajecz, 2009, p. 19). We calculated Kodak‘s equity beta of 1.68
from September 2002 through November 2009. We chose this time period to accurately reflect the increased volatility of
Kodak‘s share price relative to the market based on the company‘s digital transition. We also used industry comparables
to estimate the cost of capital for each of Kodak‘s business units, and then increased them by a factor based on the
company WACC, which we assume reflects significant additional risk of bankruptcy as indicated by the stock volatility
relative to the S&P 500 (Exhibit 15).
Kodak’s Current Marketing Strategy
Consumer
Kodak is likely targeting a segment of the consumer market that meets the following criteria: (1) adult, post-
baccalaureate, 25-40 years old; (2) active/ involved; (3) caring about relationships (friends & family); (4) non-
professional, sub-standard skills in photography; (5) high interest in capturing images of life (freeze in time) and sharing
those images in digital or printed form.
Positioning
Kodak‘s marketing decisions (explained below) imply the following positioning statement: Kodak is preferred by
adults who are active, busy and care about meaningful relationships and want to encapsulate and share important
moments in their lives, because Kodak’s products enable them to capture, share, display, and store pictures and create
keepsakes, with more ease than competitors like Canon, Nikon, and Fujifilm.
1
Risk premium over government bonds: 13.0% - 5.6% = 7.4%
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9. Product
Kodak fails to offer clear, distinguishing benefits to consumers. The company attempts to position itself as a
provider of ‗user-friendly‘ products, typically offering products whose names include the word ‗easy‘. However, some of
Kodak‘s product attributes detract from the credibility of this position (Exhibit 2). Other than a long battery life, the
Kodak EasyShare M1033 digital camera features few differentiating attributes that appeal to the user-friendly consumer.
The Kodak EasyShare 5300 printer has a cumbersome interface and PC Loader tray that lacks built-in networking
capability. Kodak‘s ‗user-friendly‘ position is undermined with products that do not deliver the promised benefit.
Kodak develops products quickly due to its competitive environment. A comprehensive program designed to
include all desirable features is nearly impossible due to the speed at which the industry evolves.
Product types face different risk scenarios depending on their newness to the company and their newness to the
market. Digital cameras are familiar to the market and to Kodak. Thus, a line extension of Kodak‘s digital cameras
creates a risk of cannibalization and a lack of incremental sales. Kodak‘s new approach to printers, with higher upfront
costs and lower ink costs, presents different risks. The product type is new to the market and new to the company,
representing a new to the world concept. Thus, the product introduction is at risk of a lack of company-market fit.
Price
Using the economic pricing model (Exhibit 5), a firm strives to deliver products that demand a price premium
over its competitors. Based on this, we compared the pricing of Kodak‘s core consumer products (digital cameras and
inkjet printers), and its secondary consumer products (digital picture frames and Kodak Gallery), to the pricing of its
direct competitors in each category. In the compact digital camera segment, Kodak‘s products are generally priced below
the products of its most direct competitors of Canon, Nikon, and Fujifilm. For example, Kodak cameras sell in the range
of $80 to $160, while cameras offered by the competitors sell in the range of $110 to $500 (Consumers Union of U.S.,
2009). This price differential implies that Kodak is suffering from negative price differentiation. While a lower price
may offer the benefit of capturing a large portion of the price sensitive consumer, we believe that the lower price signals
lower quality to the consumer, when in actuality Kodak‘s cameras deliver comparable quality to that of its competitors.
According to ConsumerReports.org, Kodak holds four of the top twenty-six spots in the point and shoot digital camera
category, only behind Canon, which dominates the rankings with nine of the top spots—Fujifilm has two cameras ranked
in the top twenty-six, while Nikon has zero (Consumers Union of U.S., 2009). As a result, we believe that there is an
opportunity for Kodak to raise its prices in this segment. The other consumer products do not suffer from negative price
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10. differentiation, and thus we do not believe an opportunity exists to change the pricing of these products (see Exhibit 6 for
further discussion on pricing of printers, digital frames, and Kodak Gallery products).
Placement
Overall, Kodak‘s placement strategy is similar to that of its competitors, in each of the main consumer product
categories. Digital cameras, inkjet printers, and digital picture frames, are typically sold through each company‘s website,
and through all major retailers such as Best Buy, Target, and Wal-Mart, both in stores and online. The photo storage
products are all offered exclusively online. Kodak‘s placement employs wide market coverage because its products are
easily accessible to all consumers. It is difficult for Kodak to differentiate itself within the placement component of the
marketing framework; however, it is important that it monitors the retailers to ensure both consistency across channels
and alignment of objectives between itself and the retailers.
Promotion
Understanding the consumer
Kodak‘s target consumers have lower levels of expertise than an amateur photographer. They are typically more
concerned about the moments captured in pictures and video rather than the art or technical skills required to do so. These
consumers will likely look to an expert (or perceived expert) in the field of photography for advice if any questions arise.
Thus, the level of involvement of Kodak‘s consumer tends to be low. While in some cases, consumers may do some
research to learn about the product they‘re seeking, this type of research is typically shallow in technicalities or details.
Once these consumers have learned what brands are reliable, where the best deals are, and how to obtain the product, they
are ready to purchase. This is when Kodak must be ready to sell.
Marketing objectives
Increased sales is the ultimate marketing objective for Kodak. At the same time, Kodak‘s promotional strategy
seems to have more specific goals depending on where the consumer is within the buying process. Prior to purchasing,
Kodak wants to represent ‗peace of mind‘, fun, and overall inspiration (Exhibit 3, figure 8). The following historic tag-
lines are indicative of such intentions: ―you press the button, we do the rest‖ in 1888 (Kodak, 2009), ―the Kodak
moment‖, ―Share Moments, Share Life‖ in 2001, and its most recent campaign ―It‘s time to smile‖ (Exhibit 3), which will
run for at least one year. These campaigns fit Kodak‘s aim to offer an easy way for consumers to capture the best
moments of their lives. Kodak also appeals to creative consumers who are interested in creating picture books, cards, t-
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11. shirts, and the like. These additional, creative options entice the consumer to invest more in Kodak products (Exhibit 3,
figure 3). Hence, after the first purchase, Kodak‘s goal is to create a repeat customer.
Reseller Analysis
The availability of products is vital to Kodak‘s success. Therefore, Kodak must ensure the consumer is directly
connected to preferred retailers whenever they are ready to buy. Unfortunately, that is not always the case in Kodak‘s
current marketing campaign. While Kodak is improving its presence amongst consumers by using several digital
initiatives, it is not always clear what is the best way to obtain the products. There is not always a link or message that
directs consumers to retailers Kodak prefers. Consequently, consumers interested in purchasing Kodak products may find
inconsistent messages while searching for a channel (e.g. prices far lower than Kodak recommends, Exhibit 3, fig. 9).
Marketing Communications
Kodak‘s marketing communications today are focused on triggering emotions and presenting an argument in
favor of some of its product attributes. The company‘s latest campaign, ―It‘s time to smile,‖ stems from the consumer
insight that today‘s work-life balance and the economic situation have negatively impacted relationships (Exhibit 3); even
though, consumers perceive it is easier to connect with friends and family today than it was 5 years ago (thanks to e-mail,
cell phones, and social networks) (Kodak, 2009). Kodak seeks to connect with the consumer at an emotional level and
encourage them to smile and make others smile – all while capturing and sharing their newfound happy moments with
Kodak products. However, the company fails to deliver a clear and differentiating promise that resonates with a
meaningful number of consumers.
Even though Kodak‘s new integrated marketing campaign is present in all major social media channels
(Facebook, Twitter, YouTube) the company‘s number of followers is significantly lower when compared with those of
competitors and other successful brands. On Facebook, as of December 12, 2009, Kodak has 47,342 fans, while Canon
and Nikon have 119,165 and 117,574 respectively. The #1 brand on Facebook, Coca-Cola, dwarfs these numbers with
over four million fans. Kodak cannot afford to lose in the digital space as social media has the powerful effect of creating
communities of ever-growing fans who evangelize the brand – all at a relatively low and fixed cost.
Without fans, the success of the social media initiative is in danger. For example, assume aggressively that the
ideal Kodak consumer spends $200 per year for 20 years in a variety of products totaling $4,000. Also, assume Kodak‘s
contribution margin stays at nearly 25% so each customer is worth $1000 to the company. If an integrated digital
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12. campaign of the magnitude that Kodak is implementing costs nearly $10 million per year to maintain, the company will
need 10,000 of these consumers to break even (Charlene Li., 2008). At less than 50,000 fans, the conversion rate needed
(20%) is quite high, considering that Facebook claims a conversion rate of only 10% for its advertising (Facebook, 2009).
Even at a more aggressive conversion rate of 15%, Kodak needs much higher numbers to succeed and be profitable.
Currently Kodak does not utilize the services of a celebrity spokesperson. This reduces any risks of brand
confusion or poor representation, commonly associated with endorsements. However, Kodak is betting too much on the
strength of its brand alone, while competitors enlist the help of famous characters like Ashton Kutcher (Nikon), and Maria
Sharapova (Canon) to energize its brand.
Promotion Conclusion
Overall, there seems to be a lack of buzz, energy, top-of-mind awareness, or fuel behind the Kodak brand. The
current marketing campaigns are not driving the number of customers necessary to create the sense of community that
Kodak is expecting, nor generating the revenues the company needs to survive.
Recommendations
Kodak fails to position itself as the indisputable solution between today‘s consumers and their need for
connection. Therefore, Kodak must focus on delivering a clearer message, a differentiating promise, and products that
meet such a promise. For example: Kodak is the premier provider of imaging solutions that bring your loved ones within
arm’s reach.
Additionally, Kodak‘s marketing campaign should present one path within the imaging process that allows the
consumer to process the company‘s offerings. For instance, prioritize marketing efforts according to the following process
(1 = highest priority): (1) take great pictures with Kodak digital cameras, (2) print quality pictures for less with Kodak
photo printers (3) store your pictures at the KodakGallery, where you can create unique keepsakes (4) display your
pictures in our industry-leading Kodak digital frames. Instead of overwhelming the consumer with all the options Kodak
has to offer, focusing the message on one product at a time can be more effective for Kodak‘s target consumer.
We feel that additional emphasis should be placed on digital cameras, with the other products—printers, frames,
and Kodak Gallery—supporting digital cameras as complementary products that round-out the digital imaging experience.
Kodak‘s 120-year history as the premier provider of photography products lends itself to this strategy of emphasizing
digital cameras. This focused strategy can be accomplished through changes in each of the components of the marketing
framework, while keeping in mind the desired positioning for Kodak‘s product-line.
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13. Because Kodak is targeting the novice photographer segment, it is important that its products incorporate easy-to-
use attributes and automatic features that deliver high-quality photos. Currently, Kodak‘s digital cameras compete well
on the number of functions offered yet do not necessarily differentiate themselves. The same holds true for the printer
category with complaints of complicated interfaces, cumbersome loader trays, and a lack of built-in networking
capabilities. Kodak should strive to simplify its products across its entire product line and further educate customers of
the easy-to-use features through its marketing campaign.
Kodak prices its camera products well below the products of its main competitors. On average, Kodak cameras
cost 31%, 132%, and 80% less than products of similar quality in the super-zoom, compact, and subcompact categories,
respectively (Exhibit 6) (Consumers Union of U.S., 2009). Kodak‘s products are consistently ranked comparably to those
of the competition. Thus, Kodak should demand similar prices for its products. Kodak should be able to increase its
prices by at least 20% on the competitively ranked cameras to signal quality to the consumer without decreasing volumes,
thus increasing profitability. This price increase will address the problem Kodak faces with poor gross margins in the
CDG segment, and lead this segment towards profitability in the future. Success with an increased pricing strategy is
dependent on Kodak effectively communicating the brand quality to the consumer.
Kodak is dependent on its resellers to increase awareness and educate the consumers about its products. Kodak
should work closely with its main retailers to encourage promotion of its digital product suite consisting of cameras,
printers, frames, and Kodak Gallery. Kodak must first educate the retail sales representatives on the features of its
products, namely the differentiating features that will focus on the ease-of-use theme. In addition, the products should be
placed strategically within the stores, to encourage bundling of the Kodak product-line.
In promotions, Kodak needs to improve the level of energy behind the Kodak brand. For this purpose, a celebrity
spokesperson could be highly effective. Because Kodak‘s consumer is relatively low involvement and the market is
already cluttered with many reasonable options (Canon, Nikon, Sony, Casio, etc.), a credible spokesperson should serve to
hold the consumer‘s hand and guide them to buy Kodak products.
The current advertising budget may need to be revised, but an increase is not automatically necessary. Kodak
should continue leveraging and improving its presence on the Internet through various digital initiatives.
Kodak implementing these recommendations will lead to increased sales and margins and ultimately allow the
company to regain its position as a world leader in its industry.
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14. Appendix
Exhibit 1 – Products Analysis
Digital Cameras
Key Kodak Canon Meaningfulness to Point of
Attributes EasyShare Powershot Market/Consumer Differentiation
M1033 A1100 IS
Price $140 $140 Consumers value quality n/a
products at an affordable price
Mega 10 12 Consumers value digital cameras Negative
Pixels which capture quality images
Zoom 3x 4x Consumers value digital cameras Negative
which capture quality images
Video Yes, with sound Yes, with Consumers value digital cameras n/a
sound which capture quality video
Battery 220 140 shots Longer battery life lowers cost Positive
Life and adds convenience, creating
value for the consumer
Image Yes Yes Consumers value digital cameras n/a
Stabilizer which capture quality images
Face Yes Yes Consumers value digital cameras n/a
Detection which are easy to use
Wide No No Consumers value digital cameras n/a
Angle which capture quality images
Manual No No Consumers value digital cameras n/a
Controls which are easy to use
Manual No No Consumers value digital cameras n/a
Focus which are easy to use
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15. Printers
Key Kodak HP Meaningfulness to Point of
Attributes EasyShare Photosmart Market/Consumer Differentiation
5300 C6180
Price $199.99 300 Consumers value printers which Positive
are affordable
Cheaper $9.99 for black, Presently, Consumers value affordable Positive
Ink $14.99 for ink costs printer ink
color double or
more;
newly
introduced
ink costs
$14.99 for
black,
$17.99 for
color
Printing Marginally Consumers value fast printers Negative
Speed Faster
Built in No Yes Consumers value printers which Negative
Networking are easy to use
User Better Consumers value printers which Negative
Interface are easy to use
Paper Consumers value high quality n/a
printing printers
quality
Photo newer photos older Consumers value high quality n/a
printing better photos printers
quality better
Hardware- worse Consumers value printers which Negative
paper tray are easy to use
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16. Digital Picture Frames
Products Compared: Kodak Easyshare 10‖ W1020 Wireless Digital Frame vs. Sony 10.2‖ Widescreen LCD Digital Frame
Does Kodak
Meaningfulness to Point of
Attribute: Kodak Sony have
Market/Consumer Differentiation
Credibility?
Yes, because
Kodak is
Built-In Important because makes the
Not known for its
Wi-Fi Included product more functional and Positive
included innovation and
Technology easier to use
excellence in
technology.
This is an
important
attribute of
digital frames,
1024 x 600 Higher resolution is perceived as and therefore,
Resolution 800x480 Negative
(better) higher quality Kodak should
likely address
the deficiency
vs. the
competition
Source: www.Kodak.com; www.bestbuy.com
Photo Storage
Key Attributes Kodak Flickr Meaningfulness to Point of Credibility
Gallery Market/Consumer Differentiation
Price Purchase of Free Customers value the ability to Negative
services store photos in a safe and
necessary secure way, with ease and at
minimum or no cost.
Requirements yearly None "" Negative
purchase
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17. Storage Limit No Yes Customers want the ability to Positive Kodak is a
store as many pictures as trusted
possible so they don't have to company so
delete or move photos customers
believe that
they have the
ability to offer
unlimited
storage with no
problems
Join No Yes Consumers enjoy connecting Negative
Clubs/Groups with others whom share
similar interests; provides a
sense of community
Video Clips Yes No Consumers increasingly use Positive Kodak is
digital camera devices to take known for its
videos in addition to photos, excellence in
so the ability to store videos photography
is valued so customers
have
Albums/Flipbooks Yes No This allows customers to Positive confidence in
creatively store and share its ability to
their photos as keepsakes deliver on
these
Prints and Editing Yes No This feature delivers Positive
attributes.
convenience by allowing
users to store, edit, and print
photos in one central place
Source: www.kodakgallery.com;
17

18. Exhibit 2 – “It’s time to smile” Campaign
Figure 1 - Reason for campaign. Source: Kodak.com
Figure 2 - Consumer Insight. Source: Kodak.com
18

19. Figure 3 - Product Portfolio. Source: Kodak.com
Figure 4 - People in need to connect. Source: Kodak.com
19

20. Figure 5 - Connecting with digital camera. Source: Kodak.com
Figure 6 – Use of social media
Figure 7 – Viral Campaign
20

21. Figure 8 - Video ads for YouTube and TV. Source: YouTube/Kodak
Figure 9 – sample banner, no link to purchase. Source: tweetPhoto.com
Figure 10 – price advertised on Kodak.com Figure 11 - Prices of other online retailers
21

22. Exhibit 3 – Competitor Endorsements
Figure 12 – Ashton Kutche, Nikon Figure 13 – Maria Sharapova
Exhibit 4 – Economic Value Pricing
According to the economic value-pricing model, a firm‘s product price is a sum of its reference value and its
differentiation value. As such, the reference value for Kodak‘s products is the price of its competitor‘s comparable
products, while differentiation value is the price premium (or discount) captured by Kodak‘s products due to additional
(or fewer) benefits offered, as perceived by the consumer.
Figure 14 - Economic Value Pricing
Exhibit 5 – Kodak Product Pricing
Within the all-in-one inkjet printer category, Kodak‘s prices are slightly higher than those of Hewlett Packard (HP) and
Canon, which is consistent with its current campaign to charge a small premium for the printer, while offering the ink at
significantly lower prices. In addition, to offset the price premium, Kodak is partnering with retailers such as Best Buy to
offer a $50 discount on a printer, when a customer recycles an old printer. The digital picture frame market is highly
fragmented with 15 different brands ranked in the top 20 by Consumer Reports (add works cited). Kodak‘s price range of
$60-$230 is consistent with the pricing of other brands. An exception to this is the pricing of Kodak‘s recently released
wireless OLED frame, which demands an extreme price premium, at a price of $999, because it is the only frame offered
22

23. to the consumer market, using this advanced technology. Kodak‘s position in the high-end digital frame market is a
significant opportunity for the company going forward. Finally, within the photo storage product market, Kodak‘s prices
are consistent with competitors such as Shutterfly and Flickr, with all three offering unlimited storage and 4x6 prints in
the $.10-$.15 range. However, Kodak is unique in requiring members to make a minimum annual purchase, depending on
the size of their photo storage.
Exhibit 6
Point And Shoot Models: Rankings And Price
Compiled from ConsumerReports.org
Super Zoom Models
Price
Overall Relative
Rank Brand Line Model Family Price Score to Kodak
1 Canon PowerShot SX10 IS Super zoom 390 78 56.00%
2 Canon PowerShot SX1 IS Super zoom 550 75 120.00%
4 Casio Exilim EX-H10 Super zoom 300 73 20.00%
5 Casio Exilim EX-FH20 Super zoom 400 73 60.00%
6 Fujifilm Finepix F70 EXR Super zoom 240 72 -4.00%
7 Kodak EasyShare Z950 Super zoom 250 72 0.00%
8 Sony Cyber-shot DSC-H20 Super zoom 280 72 12.00%
16 Samsung HZ10W Super zoom 230 69 -8.00%
21 Olympus Stylus 9000 Super zoom 230 68 -8.00%
Max -8.00%
Min 120.00%
Range 128.00%
Avg 31.00%
Compact Models
Price
Overall Relative
Rank Brand Line Model Family Price Score to Kodak
3 Canon PowerShot G10 Compact 480 74 242.86%
9 Canon PowerShot A1000 IS Compact 170 71 21.43%
13 Panasonic Lumix DMC-TS1 Compact 350 70 150.00%
18 Kodak EasyShare M1033 Compact 140 68 0.00%
20 Canon PowerShot D10 Compact 300 68 114.29%
Min 21.43%
Max 242.86%
Range 221.43%
Avg 132.14%
23

24. Subcompact Models
Price
Overall Relative
Rank Brand Line Model Family Price Score to Kodak
SD1200 IS
10 Canon PowerShot ELPH Subcompact 200 71 53.85%
11 Panasonic Lumix DMC-ZR1 Subcompact 240 71 84.62%
12 Fujifilm Finepix F200EXR Subcompact 320 70 146.15%
Exilim
14 Casio Card EX-S12 Subcompact 200 69 53.85%
15 Canon PowerShot SX110 IS Subcompact 250 69 0.00%
17 Sony Cyber-shot DSC-G3 Subcompact 420 68 223.08%
19 Canon PowerShot SD780 IS ELPH Subcompact 220 68 69.23%
22 Canon PowerShot SD980 IS ELPH Subcompact 330 68 153.85%
23 Sony Cyber-shot DSC-T90 Subcompact 250 67 92.31%
24 Samsung SL102 Subcompact 100 67 -23.08%
25 Kodak EasyShare C160 Subcompact 90 65 -30.77%
26 GE E1250TW Subcompact 160 65 23.08%
27 Kodak EasyShare M320 Subcompact 130 65 0.00%
Min -23.08%
Max 223.08%
Range 246.15%
Avg 79.72%
24

25. Exhibit 7 – Competitor Business Descriptions2
We chose the following companies as competitors because of the similarities in product type and customer focus. The
following ten companies make up the ―competitor median‖ referenced in the analysis section.
Canon Inc.
Canon Inc. is a manufacturer of business machines, cameras, and optical and other products. Canon offers business
machines including office imaging products, such as office network digital multifunction devices (MFDs), color network
digital MFDs, office copying machines and personal-use copying machines; computer peripherals, including laser beam
printers, inkjet printers and scanners and business information products, such as personal computers, servers, document
scanners, calculators and micrographic equipment. Canon also manufactures and markets digital cameras, film cameras,
digital video camcorders, lenses and various camera accessories. Canon's optical and other products mainly include
semiconductor production equipment, mirror projection mask aligners for liquid crystal display (LCD) panels,
broadcasting equipment, medical equipment, large format printers, and electronic components. On March 31, 2008, it
acquired a 24.9% stake in Hitachi Displays, Ltd. For the nine months ended 30 September 2009, CANON INC.'s revenues
decreased 27% to Y2.255T. The Company's net income decreased 76% to Y70.08B. Revenues reflect lower sales volume
from business machines, cameras and optical & other products business segments. Lower net income also suffers from
higher percentage of cost of sales and SGA expense, as well as significantly decreased interest & dividend income.
Fujifilm Holdings Corp.
FUJIFILM Holdings Corporation is a Japan-based company mainly engaged in the provision of imaging, information and
document solutions. The Company operates in three business segments. The Imaging Solution segment offers color films,
digital cameras, photo-finishing machines, and color papers, chemical and services for instant printing. The information
Solution segment offers medical systems, life-science machinery, graphic system machinery, front panel display
materials, recording media, optical devices, electronic components and inkjet materials. The Document Solution segment
offers printers, copy machines, production service-related products, paper, consumer goods and others. For the six months
ended 30 September 2009, FUJIFILM Holdings Corp.'s revenues decreased 22% to Y1.043T. Net loss totaled Y5.41B, vs.
an income of Y45.38B. Revenues reflect decreased sales from all its business segments. The company's net loss also
suffers from higher percentage of cost of sales and selling, general & administrative expense, decreases interest &
dividend income as well as higher exchange loss.
Hewlett-Packard Co.
Hewlett-Packard Company is a provider of products, technologies, software, solutions and services to individual
consumers, small- and medium-sized businesses (SMBs) and large enterprises, including the public and education sectors.
Its offerings span personal computing and other access devices; imaging and printing-related products and services;
enterprise information technology infrastructure, including enterprise storage and server technology and software that
optimizes business technology investments, and multi-vendor customer services, including technology support and
maintenance, consulting and integration and outsourcing services, as well as application services and business process
outsourcing. During the fiscal year ended October 31, 2008, its operations were organized into seven business segments:
Enterprise Storage and Servers, HP Services, HP Software, the Personal Systems Group, the Imaging and Printing Group,
HP Financial Services and Corporate Investments. For the fiscal year ended 31 October 2009, Hewlett- Packard
Company's revenues fell 3% to $114.40B. Revenues reflect a decrease in income from Company's Products & Services.
Hewlett-Packard Company is a provider of Products, technologies, software, solutions & services to individual
consumers, small & medium-sized businesses & large enterprises, including the public and education sectors.
Ricoh Co. Ltd.
Ricoh Company, Ltd. (Ricoh) is engaged in the manufacturing of office automation equipment. Ricoh's principal products
include copiers (such as plain paper copiers (PPCs)), printers (multi-functional printers (MFPs), laser printers and
2
Source: Reuters
25

26. GELJET printers), production printing products and facsimile machines. Ricoh is also a manufacturer of digital and
advanced electronic devices such as semiconductor devices. Ricoh supports its office and production printing equipment
businesses by offering customers various solution systems that work with personal computers (PC) and servers, and
related product support and after-sales services to assist customers in utilizing the Ricoh products that they purchase.
Ricoh also offers various supplies and peripheral products to be used with its products and systems. Ricoh operates in
three segments: Imaging and Solutions, Industrial Products and Other. In August 2008, Ricoh Elemex Corporation
becomes a wholly owned subsidiary of the Company. For the six months ended 30 September 2009, RICOH
COMPANY,LTD.'s revenues decreased 7% to Y988.79B. The Company's net income decreased 95% to Y1.81B.
Revenues reflect lower sales from image & solution, industrial and other business segments due to unfavorable business
environment. Net income also suffers from higher percentage of selling, general & admin expenses, as well as increased
interest expenses.
Sony Corp.
Sony Corporation (Sony) is engaged in the development, design, manufacture and sale of various kinds of electronic
equipment, instruments and devices. Sony operates in five segments: Electronics, which develops, designs, manufactures
and sells electronic equipment, instruments and devices for consumer and professional markets; Games, in which Sony
Computer Entertainment Inc. (SCEI) develops, produces, markets and distributes PlayStation 2 (PS2), PSP (PlayStation
Portable) (PSP) and PLAYSTATION 3 (PS3) hardware and related software; Pictures, which encompasses motion picture
production and distribution, television production and distribution, and digital content creation and distribution; Financial
Services, which includes the activities of Sony Financial Holdings Inc. (SFH), and All Other, which comprises Sony
Music Entertainment (SME) and Sony Music Entertainment (Japan) Inc. (SMEJ). On October 1, 2008, it acquired
Bertelsmann's 50% interest in SONY BMG MUSIC ENTERTAINMENT (SONY BMG). For the six months ended 30
September 2009, SONY CORPORATION's revenues decreased 20% to Y3.261T. Net loss totaled Y63.40B, vs. an
income of Y55.79B. Revenues reflect decreased sales volume from United States and Europe markets. The Company's net
loss also suffers from higher percentage of selling, general and administration expenses, increased interest expenses, as
well as decreased interest & dividend income.
Xerox Corp.
Xerox Corporation (Xerox) is engaged in developing, manufacturing, marketing, servicing and financing a range of
document equipments, software, solutions and services. Digital systems include printing and publishing systems; digital
presses, advanced and basic multifunctional devices (MFD's), which can print, copy, scan and fax; digital copiers; laser
and solid ink printers, and fax machines. The Company provides software and workflow solutions with which businesses
can print books, create personalized documents for their customers, and scan and route digital information. Xerox also
offers software, support and supplies, such as toner, paper and ink. The Company operates in three business segments:
production, office and other. During the year ended December 31, 2008, the Company completed the acquisition of
Veenman B.V. (Veenman) and Global Imaging Systems, Inc. (GIS). For the nine months ended 30 September 2009,
Xerox Corporation's revenues decreased 17% to $10.96B. Net income increased 33% to $305M. Revenue reflects a
decrease in revenues from production, office and other segments. Net income reflects a decrease in cost of sales &
services, lower equipment financing interest, a decrease in selling, administrative & general expenses and lower litigation
charges.
Nikon Corp.
NIKON CORPORATION is a Japan-based company mainly engaged in the manufacture and sale of optical products. The
Company is active in four business segments. The Precision Apparatus segment offers semiconductor exposure apparatus
and liquid crystal (LC) exposure apparatus. The image segment provides digital cameras, film cameras and
interchangeable lens. The Instruments segment offers microscopes, measuring machines and semiconductor inspection
equipment. The Others segment provides glass materials, telescopes, glasses and survey airplanes. The Company has 65
subsidiaries and 10 associated companies in the country and overseas markets. As of August 19, 2009, the Company held
26

27. a 92.17% stake in Metis NV. For the six months ended 30 September 2009, NIKON CORPORATION's revenues
decreased 24% to Y368.09B. The Company's net loss totaled Y17.67B, vs. an income of Y33.62B. Revenues reflect lower
sales from precision equipment business and imaging product business. Net loss also suffers from higher percentage of
cost of sales and SGA expense, significantly increased exchange loss, as well as the presence of Y1.35B loss on business
reorganization.
Olympus Corp.
OLYMPUS CORPORATION is a Japan-based manufacturer engaged in five main business segments. Its Imaging
segment offers digital cameras, film cameras and voice recorders. The Medical segment offers medical endoscopes,
surgical endoscopes, endoscope disposal equipment and ultrasonic endoscopes. The Life Science segment offers clinical
hemanalysis systems, biological microscopes and industrial microscopes. The Information Communication segment sells
semiconductor-related equipment, electronic machines, network systems an d mobile terminals, such as cellular phones,
as well as provides mobile solutions and mobile contents services. The Others segment offers industrial endoscopes,
nondestructive inspection equipment, printers and bar code scanners, as well as develops systems. In August 2009, the
Company transferred its analytical instrumentation business to its wholly owned subsidiary, which has been engaged in
the manufacturing and sale of clinical laboratory examination equipment. For the six months ended 30 September 2009,
OLYMPUS CORPORATION's revenues decreased 19% to Y435.42B. The Company's net income totaled Y36.19B, up
from Y3.60B. Revenues reflect lower sales from imaging, medical and life science business segments. Net income
benefits from a lower percentage of SG&A expenses, decreased foreign exchange losses, and the presence of Y46.27B
gains on transfer of business.
Lexmark International Inc.
Lexmark International, Inc.(Lexmark) is engaged in developing, manufacturing and supplying printing and imaging
solutions for offices and homes. Its products include laser printers, inkjet printers, multifunction devices, and associated
supplies, services and solutions. Lexmark develops and owns the technology for its laser and inkjet products and related
solutions. Lexmark also sells dot matrix printers for printing single and multi-part forms by business users. The Company
operates in the office products industry. The Company is primarily managed along divisional lines: the Printing Solutions
and Services Division and the Imaging Solutions Division. Lexmark's products are sold in more than 150 countries in
North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim and the Caribbean. For the nine months
ended 30 September 2009, Lexmark International, Inc.'s revenues decreased 19% to $2.81B. Net income decreased 61%
to $86.2M. Revenues reflect a decrease in income from sales volume of the Company. Net income also reflects decreased
operating margin, an increase in restructuring & related charges, the presence of net impairment losses on securities and
the presence of interest expense net vs. an interest income net.
Seiko Epson Corp.
SEIKO EPSON CORPORATION is a Japan-based company primarily involved in the development, manufacture and sale
of information equipment, electronic devices and precision equipment. The Company operates in four business segments.
The Information Equipment segment offers printers, liquid crystal display (LCD) projectors and personal computers,
among others. The Electronic Devices segment provides thin-film transistor (TFT) LCD panels, crystal devices and
semiconductors. The Precision Equipment segment offers watches and plastic lens under the brand name Seiko, as well as
factory automation (FA) equipment. The Others segment is engaged in the distribution and transportation services, the
provision of maintenance services for facilities, as well as the insurance agency and travel agency businesses. For the six
months ended 30 September 2009, Seiko Epson Corporation's revenues decreased 27% to Y449.63B. The Company's net
loss totaled Y29.19B, vs. an income of Y11.72B. Revenues reflect lower sales especially from electronic device business
segment. Net loss also suffers from a higher percentage of selling, general & administrative expenses, as well as the
presence of Y2.42B impairment losses.
27

28. Exhibit 8 – Profitability Scenario Analysis
28

29. 29

30. Exhibit 9: Comparison of accounting methods
International Comparison of Accounting Standards-Overview of Major Japanese GAAP, IAS/IFRS, and US GAAP
Accounting Standards Items Japanese GAAP IAS/IFRS US GAAP
Fair value or amortized cost (bonds) Fair value or amortized cost (bonds) Fair value or amortized cost (bonds)
Measurement of securities
depending on category depending on category depending on category
Estimating potential credit
Discounted future cash flows Discounted future cash flows Discounted future cash flows
losses/impairment
Financial Instruments Legal isolation required (financial- Legal isolation not required (primarily risks Legal isolation required (financial-
Derecognition of financial assets
component approach) and rewards approach) component approach)
Measurement of derivatives Fair value Fair value Fair value
Hedge accounting When hedging criteria are met When hedging criteria are met When hedging criteria are met
Basic method Purchase method Purchase method Purchase method
Exceptionally used only when strict criteria
Business Combinations Pooling of interests method Purchase method only Purchase method only
are met
Goodwill Strictly amortized with impairment Not amortized, impairment only Not amortized, impairment only
Lowest level (smallest identifiable group of Lowest level (smallest identifiable group of Lowest level (smallest identifiable group of
Grouping assets) for which cash flows are largely assets) for which cash flows are largely assets) for which cash flows are largely
independent of cash flows of other assets independent of cash flows of other assets independent of cash flows of other assets
Indication of impairment Assessed Assessed Assessed
Impairment of Assets Recoverable amount (higher of net selling
Recognition test Undiscounted future cash flows Undiscounted future cash flows
price and value in use)
Recoverable amount (higher of net selling Recoverable amount (higher of net selling
Measurement Fair value
price and value in use) price and value in use)
Reversal of impairment losses Prohibited Reversed (excluding goodwill) Prohibited
Retirement benefit obligation adjusted for Retirement benefit obligation adjusted for Retirement benefit obligation adjusted for
Recognition of liability unrecognized actuarial gains/losses and past unrecognized actuarial gains/losses and past unrecognized actuarial gains/losses and past
service cost, minus plan assets service cost, minus plan assets service cost, minus plan assets
Retirement benefits
Actuarial gains/losses Strictly amortized without corridor Corridor amortization Corridor amortization
Recognition of additional minimum
Not recognized Not recognized Unfunded accumulated benefit obligations
liability
Basic method Asset liability method Asset liability method Asset liability method
Income Taxes
Recording of deferred tax assets Based on recoverability/realizability Based on recoverability/realizability Based on recoverability/realizability
Research & Development Development costs Expensed when incurred Capitalized Expensed when incurred
Scope of subsidiaries Based on control Based on control Based on majority voting interest
Consolidated Financial
Statements Between liability and equity (under
Presentation of minority interests Between liability and equity Equity
deliberation to change to equity
Investment Property Measurement Cost Fair value or cost Generally cost
Indicates inconsistency
Source: IASplus.com
30

31. Exhibit 10: Operating cost breakdown
Operating costs as % of sales (ex-restructuring/other)
FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Kodak 22% 22% 23% 24% 25% 25% 25% 25%
Canon 35% 33% 33% 33% 34% 36% 36% 34%
FujiFilm 35% 32% 32% 33% 32% 33% 33% 32%
Nikon 31% 28% 27% 27% 28% 31% 34%
SG&A (ex-advertising) as % of sales
FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Kodak 13.1% 13.3% 15.0% 15.1% 14.7% 14.9% 14.5% 14.5%
Canon 23.3% 22.1% 22.3% 22.5% 22.6% 24.9% 25.5% 24.5%
FujiFilm 26.6% 24.7% 24.8% 24.6% 23.6% 24.0% 24.3% 24.2%
Nikon 15.2% 14.2% 14.7% 15.3% 16.1% 18.7% 20.6%
Advertising costs as % of sales
FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Kodak 3.7% 3.8% 3.0% 3.4% 3.8% 4.5% 4.9% 4.8%
Canon 2.8% 3.0% 2.8% 2.8% 3.2% 3.1% 2.4% 2.3%
FujiFilm 1.0% 1.0% 1.3% 1.5% 1.9% 1.8% 2.1% 2.2%
Nikon 8.5% 7.9% 7.0% 6.4% 6.7% 6.1% 7.1%
R/D costs as % of sales
FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Kodak 5.3% 5.2% 5.3% 5.9% 6.3% 5.6% 5.9% 5.9%
Canon 9.1% 8.2% 7.4% 7.6% 7.9% 8.1% 7.9% 7.5%
FujiFilm 7.9% 6.6% 6.4% 6.8% 6.6% 6.8% 6.3% 6.1%
Nikon 7.0% 6.1% 5.7% 5.1% 5.3% 6.0% 5.9%
Restructuring costs as % of sales
FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Kodak 1.5% 5.3% 3.5% 4.8% 5.1% 3.6% 0.8% 5.0%
Canon 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
FujiFilm 0.0% 0.0% 3.4% 3.2% 0.0% 0.0% 0.0% 0.0%
Nikon 0.0% 0.1% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Company reports, Factset Fundamentals
31

32. Exhibit 11 - Cash Conversion Cycle
Days of Sales Outstanding (DSO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Eastman Kodak Co. 72 days 71 days 82 days 75 days 68 days 67 days 63 days 65 days 69 days
Canon Inc. 63 days 62 days 64 days 62 days 63 days 62 days 61 days 59 days 59 days
FUJIFILM Holdings Corp. 77 days 80 days 77 days 77 days 75 days 77 days 75 days 77 days 85 days
Hewlett-Packard Co. 73 days 72 days 70 days 72 days 74 days 78 days 70 days 60 days 61 days
Ricoh Co. Ltd. 115 days 120 days 114 days 117 days 120 days 105 days 86 days 90 days 93 days
Sony Corp. 51 days 48 days 53 days 51 days 50 days 53 days 50 days 53 days 59 days
Xerox Corp. 117 days 108 days 112 days 116 days 120 days 128 days 132 days 133 days 142 days
Nikon Corp. 62 days 56 days 58 days 62 days 64 days 69 days 79 days 79 days 90 days
Olympus Corp. 61 days 64 days 61 days 61 days 58 days 59 days 62 days 63 days 62 days
Lexmark International Inc. 45 days 41 days 43 days 44 days 49 days 47 days 47 days 55 days 57 days
Seiko Epson Corp. 56 days 51 days 54 days 59 days 58 days 57 days 54 days 62 days -
Mean 72 days 70 days 72 days 72 days 73 days 73 days 71 days 72 days 78 days
EK (+/-) 0 days 0 days 10 days 2 days -5 days -6 days -7 days -7 days -9 days
Median 63 days 64 days 64 days 62 days 64 days 67 days 63 days 63 days 66 days
EK (+/-) 10 days 6 days 17 days 12 days 4 days 0 days 0 days 2 days 3 days
Days of Inventory on Hand (DIO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Eastman Kodak Co. 48 days 48 days 50 days 50 days 47 days 43 days 44 days 49 days 60 days
Canon Inc. 94 days 92 days 92 days 89 days 95 days 100 days 103 days 104 days 106 days
FUJIFILM Holdings Corp. 89 days 95 days 87 days 87 days 87 days 87 days 85 days 88 days 93 days
Hewlett-Packard Co. 37 days 32 days 36 days 38 days 38 days 39 days 40 days 48 days 59 days
Ricoh Co. Ltd. 54 days 57 days 53 days 53 days 55 days 54 days 52 days 57 days 64 days
Sony Corp. 55 days 60 days 60 days 54 days 51 days 48 days 47 days 46 days 55 days
Xerox Corp. 46 days 44 days 44 days 46 days 47 days 46 days 49 days 54 days 73 days
Nikon Corp. 183 days 172 days 169 days 179 days 189 days 205 days 244 days 258 days 243 days
Olympus Corp. 61 days 68 days 59 days 54 days 58 days 68 days 91 days 103 days 118 days
Lexmark International Inc. 48 days 55 days 50 days 46 days 44 days 47 days 48 days 53 days 56 days
Seiko Epson Corp. 64 days 71 days 66 days 66 days 59 days 60 days 61 days 68 days -
Mean 71 days 72 days 70 days 69 days 70 days 73 days 79 days 84 days 92 days
EK (+/-) -23 days -24 days -19 days -19 days -23 days -29 days -35 days -35 days -32 days
Median 55 days 60 days 59 days 54 days 55 days 54 days 52 days 57 days 68 days
EK (+/-) -7 days -12 days -9 days -3 days -8 days -10 days -9 days -8 days -8 days
Days of Payables Outstanding (DPO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Eastman Kodak Co. 67 days 123 days 108 days 38 days 33 days 33 days 32 days 31 days 31 days
Canon Inc. 86 days 79 days 84 days 85 days 92 days 91 days 94 days 90 days 90 days
FUJIFILM Holdings Corp. 74 days 68 days 73 days 72 days 75 days 84 days 81 days 74 days 71 days
Hewlett-Packard Co. 55 days 52 days 55 days 58 days 53 days 56 days 55 days 47 days 48 days
Ricoh Co. Ltd. 105 days 95 days 103 days 107 days 111 days 109 days 104 days 103 days 107 days
Sony Corp. 116 days 111 days 120 days 117 days 116 days 117 days 113 days 112 days 113 days
Xerox Corp. 43 days 48 days 45 days 43 days 42 days 39 days 36 days 32 days 32 days
Nikon Corp. 110 days 99 days 110 days 110 days 112 days 118 days 126 days 105 days 115 days
Olympus Corp. 55 days 50 days 54 days 55 days 53 days 61 days 76 days 75 days 78 days
Lexmark International Inc. 65 days 73 days 67 days 62 days 63 days 59 days 48 days 47 days 52 days
Seiko Epson Corp. 44 days 39 days 43 days 44 days 44 days 50 days 47 days 47 days -
Mean 75 days 76 days 78 days 72 days 72 days 74 days 74 days 69 days 74 days
EK (+/-) -7 days 47 days 30 days -34 days -39 days -41 days -42 days -38 days -42 days
Median 67 days 73 days 73 days 62 days 63 days 61 days 76 days 74 days 74 days
EK (+/-) 0 days 50 days 35 days -24 days -30 days -28 days -45 days -43 days -43 days
Cash Conversion Cycle 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01
Eastman Kodak Co. 53 days -5 days 24 days 87 days 81 days 77 days 75 days 83 days 98 days
Canon Inc. 70 days 76 days 72 days 67 days 66 days 70 days 70 days 73 days 74 days
FUJIFILM Holdings Corp. 91 days 107 days 91 days 92 days 87 days 80 days 79 days 91 days 107 days
Hewlett-Packard Co. 55 days 52 days 52 days 51 days 59 days 61 days 55 days 61 days 73 days
Ricoh Co. Ltd. 65 days 82 days 65 days 63 days 64 days 50 days 34 days 44 days 50 days
32

33. Sony Corp. -11 days -4 days -7 days -12 days -14 days -16 days -17 days -14 days 1 days
Xerox Corp. 119 days 103 days 112 days 119 days 125 days 135 days 145 days 155 days 183 days
Nikon Corp. 135 days 129 days 117 days 132 days 141 days 156 days 197 days 231 days 218 days
Olympus Corp. 68 days 83 days 66 days 60 days 63 days 65 days 77 days 90 days 102 days
Lexmark International Inc. 28 days 23 days 26 days 28 days 30 days 35 days 47 days 61 days 61 days
Seiko Epson Corp. 76 days 83 days 78 days 81 days 73 days 67 days 69 days 83 days
Mean 68 days 66 days 63 days 70 days 70 days 71 days 76 days 87 days 97 days
EK (+/-) -15 days -71 days -39 days 17 days 11 days 6 days 0 days -4 days 1 days
Median 68 days 82 days 66 days 67 days 66 days 67 days 70 days 83 days 86 days
EK (+/-) -15 days -86 days -42 days 20 days 15 days 10 days 5 days 0 days 12 days
33

34. Exhibit 12 – EK Pro Forma Financial Statements
EK Financial Statement projections - Continuing Operations
(Fiscal year ends 12/31) 2006 2007 2008 2009E* 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Revenue $10,568.0 $10,301.0 $9,416.0 $7,434.2 $8,125.1 $8,133.3 $7,912.6 $7,622.6 $7,314.5 $7,001.6 $6,706.0 $6,430.5 $6,179.0
COGS 7,825.0 7,628.0 7,275.0 6,037.3 6,221.7 6,128.4 5,964.2 5,725.9 5,470.4 5,207.4 4,953.4 4,709.9 4,479.6
Gross Profit 2,743.0 2,673.0 2,141.0 1,396.8 1,903.4 2,005.0 1,948.4 1,896.7 1,844.1 1,794.2 1,752.6 1,720.6 1,699.4
SG&A (excl. Advertising) 1,567.0 1,378.0 1,236.0 970.3 1,063.0 1,059.4 1,023.3 977.2 928.5 879.1 831.9 787.3 745.9
Advertising 366.0 394.0 350.0 254.8 273.9 283.1 289.2 294.7 300.1 305.3 311.4 318.2 325.8
R&D 578.0 549.0 501.0 364.0 395.2 400.7 397.9 392.5 386.7 380.6 375.4 371.3 368.4
EBIT 232.0 352.0 54.0 (192.3) 171.3 261.8 238.0 232.3 228.9 229.1 233.9 243.8 259.4
D&A 1,195.0 785.0 500.0 470.2 448.1 430.2 416.2 407.2 399.7 393.5 388.5 384.6 381.7
EBITDA 1,427.0 1,137.0 554.0 277.9 619.4 692.0 654.2 639.5 628.6 622.6 622.4 628.3 641.1
NOPAT (EBIT * (1-tax)) 191.4 290.4 44.6 (158.6) 141.3 216.0 196.4 191.6 188.8 189.0 193.0 201.1 214.0
D&A 1,195.0 785.0 500.0 470.2 448.1 430.2 416.2 407.2 399.7 393.5 388.5 384.6 381.7
Restructuring (after tax) 618.8 547.0 122.9 133.4 121.9 116.7 114.2 113.0 112.4 112.1 112.0 111.9 111.9
Cap-Ex 335.0 259.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0
Free Cash Flow (excl dividends) $432.7 $269.4 $167.6 ($75.8) $213.5 $275.5 $244.3 $231.8 $222.1 $216.4 $215.5 $219.8 $229.8
Margin Analysis
Gross Margin 26.0% 25.9% 22.7% 18.8% 23.4% 24.7% 24.6% 24.9% 25.2% 25.6% 26.1% 26.8% 27.5%
SG&A margin 18.3% 17.2% 16.8% 16.5% 16.5% 16.5% 16.6% 16.7% 16.8% 16.9% 17.0% 17.2% 17.3%
R&D margin 5.5% 5.3% 5.3% 4.9% 4.9% 4.9% 5.0% 5.1% 5.3% 5.4% 5.6% 5.8% 6.0%
EBIT margin 2.2% 3.4% 0.6% -2.6% 2.1% 3.2% 3.0% 3.0% 3.1% 3.3% 3.5% 3.8% 4.2%
EBITDA margin 11.3% 7.6% 5.3% 6.3% 5.5% 5.3% 5.3% 5.3% 5.5% 5.6% 5.8% 6.0% 6.2%
Key Assumptions:
* 2009 assumptions are based on results through Q3 2009 with a seasonality uptick for the fourth quarter.
Key cash flow assumptions stated for segments below. Note that these are pro forma numbers and there might be immaterial differences with the aggregated
segments due to slightly different treatment of ―Other‖ income and expense items.
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