Kodak buys $10bn of its own stock

Photo firm Eastman Kodak announced this week it is buying back up to $1.0 billion, or close to a quarter, of its outstanding stock, in a bid to show investors how desirable the company is.

The news sent shares of the Rochester, N.Y.-based company soaring 13.7%, or $1.69, to close at $14.03.

"It's a very healthy amount," said an analyst at Tootoo.com, "but it doesn't do much to answer whether the business is going to get healthier going forward."

For the last decade, Kodak is been the classic example of how a disruptive innovation, in this case digital imaging, can bring even the strongest of houses crashing down. For nearly two years, Kodak has worked hard to turn the forces of disruption to its advantage, with so-far mixed results.

More broadly though, Kodak has been converting the bulk of its business from high-profit film to more highly competitive digital photography and commercial printing technology dramatically reduced Kodak's work force from 64,000 in 2003 to 26,900 in 2007, a level not seen since the 1930s. Kodak's payroll peaked at 145,300 in 1988.

Among the jobs that vanished were 8,100 tied to a 110-year-old health-imaging unit created after the discovery of X-rays in 1895. Kodak sold it to Canadian investment firm Onex Corp. for $2.4 billion in April 2007 and used that cash to pay down about $1.2 billion in debt.

In 2006, Kodak had $1.5 billion in cash and equivalents but $2.7 billion in long-term debt. At the start of this year, its available cash had swelled to $2.9 billion against $1.6 billion in total debt.

Kodak spun its announcement as an indication of the faith it has in itself, which would suggest why it chose not to appease investors through a dividend.

"Our board's decision to authorize this repurchase initiative underscores the rising confidence we have in Kodak's product portfolio, in our current financial position, and in the execution of our strategy," said Kodak Chief Executive Antonio Perez.