February 06, 2014

Just Desserts!

You've probably read about all the changes in Kodak in the past two years. Kodak, our old friend, filled our homes with "Kodak Moments" and Paul Simon crooned his famous song, Kodachrome!

For years you couldn't look at the back of a photo that didn't have the name "Kodak" printed diagonally claiming the paper, matte, glossy or satin!

Kodak is over 132 years old; it's assets worth well over $5 billion. Most of those assets were patents. Patents for technology discovered, invented, created by their employees. Scientists, Engineers, Chemists and Technology geeks.

At one time Kodak employeed 145,000! In 2003 the business laid off over 47,000 employees, including some of the people who made the company it's wealth.

As the company was on the brink of bankruptcy, filled a Chapter 11 in early 2012, CEO, Antonio Perez said "...one of things it will do is streamline its structure!" Yup, another 1000 people laid off.  Eventually, bankruptcy protection was granted by the courts with Kodak still employing approximately 17,000. At the end of the process, less than 8,000 were still employed. Kodak kept the patents but shed itself of the people who had engineered it's wealth.

These patents were the meat of the company, again, worth more than $5 billion! The patents had to be auctioned off to save the business and the stock holders.

Big giants in the technology world, especially digital world (Apple, Google, Microsoft, Amazon, gathered into two groups. After a short bidding, a final amount was offered and Kodak refused it. Appalled that the groups were trying to "steal" their patents. In spite of the patents being worth more than $5 billion, the company owed more than $6 billion.

The court ordered the company to sell those patents. But wait, the original offered had been withdrawn. The two factions of major players joined ranks. Now only one "entity" wanted the patents and they were only willing to pay just a tad over $500,000 for all those patents.

Oh, did you know that Mr. Perez's income from Kodak was $5,718,190 in 2010, other officers were being paid in the general area of $1,100,000 annually.

In 2012, in the middle of bankruptcy protection the courts gave Kodak (Perez, who also sat on the Board of Directors and had prioritized Chief Officers salaries) permission to terminate health and welfare benefits to thousand of it's retirees. Maybe this was necessary because the failing business had just handed out $13.5 million in bonuses to who? Executives, the ones who were already being paid a million dollars a year (give or take a hundred thousand here and there). Sadly, Perez's salary in 2012, after cutting benefits to retiree's and issuing bonuses was a paltry $3.46 million. (Can you hear the violins? A moment of silence for Mr. Perez's reduction in income).

$5 billion dollars worth of patents sold for less than a penny per dollar of value! Sounds like Just Desserts to me.

Oh, yes. The common stock was cancelled, leaving stockholders empty handed. New stock has been issued to the debt holders, Wallmart, Best Buy, etc.

An article in the Southeast Missiourian newspaper states, "You can feel the spirit of George Eastman in Antonio Perez's office." http://www.semissourian.com/story/2001667.html

Really? I had always thought of Eastman as a innovative and giving man. He was well known for his philanthropic ideals and his refusal to gain publicity from his donations. He founded a dental clinic, donated a huge amount to a dental clinic in England and worked diligently to promote health and wellness for his employees. He promoted education with substantial amounts..

The article goes on to say that a large portrait of Eastman hangs near the entrance of the office. I wonder if it cries. I wonder, too, if Perez can feel Eastman's eyes following him as he walks through the space.

Mr. Eastman suffered from a debilitating spinal disease and ended his own life. He left a note reading, "To My Friends, My work here is done. Why wait? GE". 

I wonder, if Mr. Eastman were alive today to witness the lack of character and integrity in his company if he would shoot himself again.

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