Fisher is stepping down as Kodak chief executive

First outsider to run largest film company to give up post in Jan.


In a statement whose timing, if not its content, surprised many, Eastman Kodak Co. announced yesterday that Daniel A. Carp, 51, would succeed George M. C. Fisher as chief executive Jan. 1. Fisher, who is 58, will remain chairman until his contract expires Dec. 31, 2000.

Carp, a 29-year Kodak veteran, has been the heir apparent since he was named president in 1997, and shareholders took the announcement in stride. Kodak stock barely moved yesterday, closing at $69.75, up 25 cents.

"Carp is well respected and experienced, so no one really has any concerns," said Jack L. Kelly, who follows Kodak for Goldman, Sachs & Co.

Most analysts do expect that the energy level around Kodak's headquarters in Rochester, N.Y., will soon be up a notch, though. "George thinks of big strategic objectives," said Gibboney Huske of Credit Suisse First Boston. "Dan is detail-oriented and aggressive, and you'll see a real acceleration in the pace of change."

In some ways, Fisher has given Carp an easy act to follow. Until this year, Kodak sales were flat, its digital portfolio was hemorrhaging cash, rival Fuji Photo Film Co. was eat- ing into its market share, and Kodak's stock price seemed on a roller coaster.

"George really didn't meet the expectations that were in place when he joined Kodak," Huske said.

When Fisher was recruited from the top spot at Motorola Inc. in 1993, he was hailed as the wizard who would magically solve Kodak's problems. Kodak, fearful that digital technology would make its conventional film business obsolete, had branched into pharmaceuticals and a polyglot of other businesses. Growth slowed, and it was saddled with huge debt.

Fisher sold those businesses, cleaned up the balance sheet, and began steering the company toward its current "digitization strategy" of using digital technology to enhance, not replace, conventional film. He brought more outsiders into the company and onto its board, and began investing heavily in China and other emerging markets.

"He cleaned up a mess of monumental proportions," said Ulysses Yannas, an analyst with Mercer, Bokert, Buckman & Reid and one of Kodak's most ardent fans.

But by late 1997, when Fisher's contract was running out, Kodak again was in a financial mess. The company was reeling from a strengthening dollar and growing softness in overseas markets; it was a high-cost manufacturer, and its growing portfolio of digital products was losing hundreds of millions of dollars annually.

Kodak's board did not blame Fisher; it extended his contract through 2000, to give him more time to fix the company. He soon announced a restructuring that would eliminate 19,000 jobs and shave more than $1 billion from annual costs.

But Fisher did make numerous missteps. He bought a chain of retail photo stores, only to sell it at a loss. A software business he bought has never made money.

Most analysts say he should have cut costs much sooner -- and several say that Carp would have liked to do so. They say that Fisher pumped money into far too many digital products.

In film, Fisher fought an embarrassing and ultimately unsuccessful battle to get the World Trade Organization to cite Japan for unfair market practices. While he was doing that, Fuji was increasing its share of the U.S. market.

Today, though, Kodak is in fairly solid shape. Its costs are down, its digital losses are under control, and sales were up 5 percent in the first quarter of this year.

"If our stock weren't still so undervalued, I'd feel pretty good about everything right now," Fisher said in a joint interview with Carp yesterday.

Both men say that Kodak is on track to meet its goal of 8 percent to 10 percent annual revenue growth by 2004, much of it from the digitization strategy.

"Yesterday, I saw someone looking at a picture of his new grandchild that had been e-mailed to his desktop computer," Carp said. "That's a modern Kodak moment."

In hindsight, analysts say they should have expected a changing of the guard. At an analysts' meeting in April, Fisher spoke briefly, passed the microphone to Carp, and let him answer questions. "He acted like he was passing the baton," Yannas said.

Several suggest that the sudden death last month of Harry L. Kavetas, 61, Kodak's chief financial officer and one of Fisher's closest advisers, dampened Fisher's enthusiasm. "The steam seemed to go out of him after Harry died," one analyst said.

Others suggest that the board, which granted Carp 400,000 stock options last year -- more than twice Fisher's 155,000 options -- was rushing succession to keep Carp from jumping ship. "Maybe Dan just said, `I've got another opportunity, so let's nail this thing down,' " suggested Michael Ellmann, a Schroder & Co. analyst.

Unlike Fisher, Carp has spent his entire 29-year career as a Kodak man, much of it running the company's operations in Europe and Latin America.

Fisher insists that he does not know what he will do next, although the idea of teaching seems to quicken his pulse. "Even when I was still with Motorola," he noted, "I said I'd want to do something different with my life when I was around 60."

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