Kodak Options: The Picture Is Gloomy

By David Russell

Eastman Kodak (EK) is down 80 percent in the last year, and options action today suggests that it might continue lower.

Our Depth Charge monitoring program detected two large purchases of the October 1 puts for $0.05 and $0.10 totaling 10,000 contracts. There was previously no existing open interest in the strike. In a second trade, an investor apparently bought 1,000 August 2 puts for $0.20 against existing open interest of 1,000 contracts.

EK is up 1.51 percent to $2.69 in late morning trading. The camera and film company reported a loss of $1.32 per share in the first quarter and on a 29 percent decline in revenue.

Options volume in EK is eight times average, with puts outnumbering calls by 17 to 1.

(Chart courtesy of tradeMONSTER)

Comments

[123andy:]

I am loss to figure out how Kodak can make it. I have been in this position for the past few years. Kodak has done an excellent job in developing technically savy and high quality products at reasonable prices. But, there are many others who offer digital cameras, printers, etc. and there is no overwhelming competitive advantage. Brand loyalty has been non-existant for quite a while. It is hard to pull this dog out of the ditch. I can't understand why people keep paying/funding the huge losses over the years. Polaroid has already cratered a few years back. I looked at a senior executive position there about ten or so years ago and after a long weekend of going over the pros and cons I decided I could not in good conscience lead the organization that I did not see on a path to success. Someone else took the job and indeed lead it into the crater. It is perhaps time to take the good people at Kodak and free them from the misery, shut it down and move the talent to somewhere else so they can succeed.

Jun 25 09:22 AM

[HerrHansa:]

They bought CREO, Nexpress, and several other well known companies in commercial printing and graphic arts businesses over the last few years. Eastman Kodak (EK) are now the biggest player in that commercial printing market. Unfortunately this is almost a business face of revenues for what is largely still considered a consumer oriented company. Their timing on this was terrible, in that they barely covered the expenses of acquisitions prior to a slowdown in global printing. In many ways, they are more tied to that recovery than their consumer products, because the revenues are there.

A look at their financial statements shows where they generate revenues, and where they enjoy huge profits. Unfortunately the most profit is in traditional film, which is a declining (or at best no growth) market. Consumer digital lacks profits, though if they sell chips to other companies they could help their profit margins.

At this point moving forward, I think their CEO and upper management are sitting on their hands. If I was a shareholder, I would be pushing for a change in management, because the current Kodak has no direction. Growth is needed to move forward, even if it is slow growth at lower profit margins.

Jun 25 06:10 PM