A Conference Call Worth 1,000 Words

Staring down his critics, Kodak CEO Daniel A. Carp unveils a bold rescue plan to remake his troubled $12.8 billion company.

Daniel A. Carp, CEO of Eastman Kodak Co.

Sales and earnings conference call
October 22, 2003

Picture this: The CEO behind one of the world's best known but most troubled brands announces a bold rescue plan. He slashes the dividend to finance a companywide transformation. The stock nose-dives. Among outraged investors, there's talk of a rebellion to force the company to change course. To the barricades!

Now, after a month of second-guessing, the CEO has to face the music. He could defend the controversial strategy; he could cave to the rebels; or he could take a more familiar path, dodging the fight and denying anything is wrong.

Such was the high drama that turned Eastman Kodak's third-quarter investors' conference call into a leadership test of sorts for CEO Daniel A. Carp. Our verdict: Carp passed impressively. Confronting his critics, he made a compelling case for change as coolly as if he were reviewing the operating instructions on a disposable camera. See? Nothing to it.

Of course, Carp's plans for Kodak are anything but simple. He intends to transform the $12.8 billion film giant into a multifaceted digital company through $3 billion in acquisitions and investments. Or as Carp put it, he'd turn a "one-trick pony" into "a more balanced company" that leverages its strong brand, technical expertise, and manufacturing assets into a variety of new digital-imaging ventures. The key: managing Kodak's declining, $9.5 billion film operation while simultaneously growing new businesses.

It's not often that you see a big-company executive face down shareholders by arguing for the long-term view. It's just not a very popular position--or a sound career-preservation strategy. But here was Carp, taking a stand--and doing so shrewdly and gracefully.

He conceded, first, that a three-hour call with investors four weeks earlier had left them wanting. "It's clear that we could have done a better job that day of explaining our plans," Carp said. It fell short of an apology, but it did convey much-needed humility and candor. "I applaud him for doing that," Timothy M. Ghriskey, president of shareholder Ghriskey Capital Partners, said later. "This was a leadership-telling event."

Carp knew that dissident investors planned to meet later that day to discuss a challenge to his plans. So this call was his preemptive strike. He managed to make the digital strategy sound not just logical but absolutely necessary. If Kodak doesn't develop these new products--ink-jet printers, digital displays, and imaging software--"we run the risk of customers switching their business, both the analog and the digital, to a competitor. . . . This thing goes away fast."

Carp didn't acknowledge Kodak's historic, catastrophic slowness to change; by now, that was beside the point. He also didn't buckle under duress. Stuck in the hot seat, Carp managed to defend his plans without sounding . . . defensive.

Predictably, he didn't pacify everyone. The carping resumed that afternoon in a packed gathering of 100 shareholders at Providence Capital in Manhattan. Participants were thoroughly unimpressed by Carp, Providence president Herbert Denton said afterward. "The stock has gone from 95 to 24, and he's saying, 'Trust us.' That's not good enough."

Consider this, though: Three weeks later, Kodak shares had rebounded off their lows by 10%. Part of that reflected investor Carl Icahn's apparent interest in buying a chunk of stock. But it may just be that Carp won some shareholders over to the long view. And that could make for the ultimate Kodak moment.

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