Legg attends gathering of Kodak dissidents in N.Y.

Company's strategy shift concerns No. 1 stockholder

October 24, 2003|By Bill Atkinson | Bill Atkinson,SUN STAFF

William H. Miller III, who oversees Legg Mason Inc.'s Value Trust, dispatched a member of his team to a meeting this week of large institutional investors who are threatening to challenge the management of Eastman Kodak Co.

Dissident shareholders who attended the meeting want to block Kodak from moving ahead with an aggressive push into the highly competitive digital imaging market while de-emphasizing its traditional film business.

Such an ad-hoc gathering of dissatisfied money managers is extraordinary in the buttoned-down world of institutional investors. But Miller's being represented at the session makes sense, regardless of his view of Kodak's strategy.

Miller and Legg Mason Inc., a Baltimore brokerage and money management company, have plenty at stake in the argument.

Value Trust, which has $9.8 billion in assets under management, owned 13 million shares of Kodak as of June 30. The shares were worth $299 million yesterday. Legg Mason funds are Kodak's largest shareholder.

"I think it is fairly wise in terms of having large shareholders get together," said Rachel Barnard, a stock analyst at Morningstar Inc., the Chicago investment research firm, who follows Legg Mason. "It makes sense. If I was Bill Miller, I would get other Kodak shareholders and talk."

The meeting was held Wednesday afternoon at Providence Capital Inc.'s New York offices. Providence is leading the group of unhappy investors.

Miller could not be reached for comment, but a Legg Mason spokeswoman confirmed that a member of his team was there.

Weeks ago, Kodak Chief Executive Officer Daniel A. Carp announced plans to transform the company.

Kodak hopes to do this by playing down its traditional but shrinking film and processing operations in favor of digital imaging acquisitions and building an ink-jet printer business. The printer market is brimming with competitors, such as Hewlett-Packard Co., Seiko Epson Corp. and Lexmark International Inc.

The institutional shareholders also are smarting from the company's decision last month to slash its annual dividend to 50 cents from $1.80, a 72 percent cut designed to save money for the push into digital.

Kodak's shares have plunged 34.4 percent this year. The stock closed yesterday down 26 cents to $23. On Wednesday, Kodak said profit slid 63 percent in the third quarter, to $122 million.

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