A little note to make the point:
Earlier this week, Moody\’s, the ratings agency, downgraded several Kodak debt securities, sending it further towards \”junk\” status. Fitch downgraded the company a day later.
Its shares are at their lowest since June 1935.
There\’s no particular reason why a company should last forever: in the larger scheme of things it\’s a method of exploiting a technology, a market position. If that technology becomes redundant, the market position disappears, there\’s no real reason for the company to continue to exist.
Sure, maybe it should have diversified: but perhaps not. All the systems, all the assets, the knowledge, were there to handle photography. That doesn\’t particularly translate into being good at digital cameras (entirely different technology cycles, a very different business to be in) let alone anything else.Being good at film is just great: but when no one wants film any more than the assets, the knowledge, they probably should be sold off, dispersed: asset stripped if you like. Moved to other higher valued uses, creating wealth in the process.
This seems obvious with Kodak: but the same is true of all companies in the end. There\’s a good argument sometimes put forward that Microsoft should stop investing. The money all came from owning the desktop: that stage of computing isn\’t over, by a long way, but there\’s no particular advantage that the company has outside the desktop: ecept for pots and pots of money of course. So why not return that money to the shareholders. Regard that near mkonopoly of the desktop as a wasting asset to be sweated for maximum return rather than having the money pilfered for Zune and other such nonsenses.
Or BP, Shell: great oil companies but that\’s the point, they\’re in oil. Not energy, not electricity, not solar, windmills. That\’s not their skill. When we no longer want oil they probably won\’t exist: and we also probably shouldn\’t be shouting at them to invest in those things like wind and solar that they don\’t know much about.
(Yes, I do know that Shell is in wind and BP was in solar, but they\’re not actually what each company is good at).