Kodak Points to Capture

Kopin Tan argues in this week’s Barrons that Kodak remains a viable force in digital imaging, that "prospects for a turnaround might be brighter than Kodak skeptics think."

While Kodak faces competition in each segment — Hewlett-Packard is a big name in printers, Snapfish a popular Internet printer — few rivals can challenge the company across the entire photo-finishing spectrum, where a still-formidable brand remains a key asset. Study after study has shown how awareness of the Kodak name helps drive purchase consideration. Taking a page from Apple Computer’s (AAPL) playbook, Kodak this month opened lifestyle stores in New York and San Francisco, ostensibly to showcase its multitude of gadgets, but in fact to brand itself as the shrine for all things imaging.

Although Kodak is No. 1 in U.S. camera sales, it trails Sony (SNE) and Canon worldwide. Moreover, as the digital business grows, the company must stay ahead of rapidly evolving technology and fickle consumer tastes. It doesn’t inspire confidence to know that the average age of Kodak’s board is 59 and that the executives leading the turnaround are old enough to have starred in home movies shot with a Brownie. On the other hand, Kodak’s storied past could be a source of future revenues. […] Every few decades, something comes along to transform the way people take pictures. If Kodak can keep pace today, its customers — and its shareholders — will relish the results. As Ivan Feinseth, director of research at Matrix USA and Wall Street’s lone Kodak bull, observes, Kodak’s return on capital already is edging up, after bottoming at 2.5% three years ago. Given its strong brand, and his belief that the worst is behind it, Kodak should trade up as management makes more progress.

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