Kodak 2008 Annual Report Download - page 15

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The competitive pressures we face could harm our revenue, gross margins and market share.
The markets in which we do business are highly competitive, and we encounter aggressive price competition for all our products and
services from numerous companies globally. Over the past several years, price competition in the market for digital products, film
and services has been particularly intense as competitors have aggressively cut prices and lowered their profit margins for these
products. In the Graphic Communications Group segment, aggressive pricing tactics by our competitors have intensified the contract
negotiation process. Our results of operations and financial condition may be adversely affected by these and other industry-wide
pricing pressures. If the Company is unable to obtain pricing or programs sufficiently competitive with current and future competitors,
Kodak could also lose market share, adversely affecting its revenue and gross margins.
If we fail to manage distribution of our products and services properly, our revenue, gross margins and earnings could be
adversely impacted.
The Company uses a variety of different distribution methods to sell our products and services, including third-party resellers and
distributors and both direct and indirect sales to both enterprise accounts and customers. Successfully managing the interaction of
direct and indirect channels to various potential customer segments for our products and services is a complex process. Moreover,
since each distribution method has distinct risks and costs, our failure to implement the most advantageous balance in the delivery
model for our products and services could adversely affect our revenue, gross margins and earnings. Due to changes in the
Company’s go-to-market models, the Company is more reliant on fewer distributors. This has concentrated the Company’s credit
risk, which, if not appropriately managed, could result in an adverse impact on the Company’s financial performance.
We may provide financing and financial guarantees to our customers, some of which may be for significant amounts.
The competitive environment in which we operate may require us to provide financing to our customers in order to win a contract.
Customer financing arrangements may include all or a portion of the purchase price for our products and services. We may also
assist customers in obtaining financing from banks and other sources and may provide financial guarantees on behalf of our
customers. Our success may be dependent, in part, upon our ability to provide customer financing on competitive terms and on our
customers’ creditworthiness. As noted previously, the recent tightening of credit in the global financial markets could adversely affect
the ability of our customers to obtain financing for significant purchases, which could result in a decrease in, or cancellation of,
orders for our products and services. If we are unable to provide competitive financing arrangements to our customers or if we
extend credit to customers whose creditworthiness deteriorates, this could adversely impact our revenues, profitability and financial
position.
Due to the nature of the products we sell and our worldwide distribution, we are subject to changes in currency exchange
rates, interest rates and commodities costs that may adversely impact our results of operations and financial position.
Kodak, as a result of its global operating and financing activities, is exposed to changes in currency exchange rates and interest
rates, which may adversely affect its results of operations and financial position. Exchange rates and interest rates in certain markets
in which the Company does business tend to be volatile. In addition, Kodak’s products contain silver, aluminum, petroleum-based or
other commodity-based raw materials, the costs of which can be volatile. There can be no guarantees that the global economic
situation will not worsen creating further volatility in currency exchange rates, interest rates and commodity prices, which could have
future negative effects on revenue and earnings.
If we cannot protect our reputation due to product quality and liability issues, our business could be harmed.
Kodak products are becoming increasingly sophisticated and complicated to design and build as rapid advancements in
technologies occur. Although Kodak has established internal procedures to minimize risks that may arise from product quality and
liability issues, there can be no assurance that Kodak will be able to eliminate or mitigate occurrences of these issues and
associated damages. Kodak may incur expenses in connection with, for example, product recalls, service and lawsuits, and Kodak’s
brand image and reputation as a producer of high-quality products could suffer.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and
expenses.
Our worldwide operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages,
tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade
disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions
could seriously harm our revenue and financial condition and increase our costs and expenses. In addition, some areas, including
parts of the east and west coasts of the United States, have previously experienced, and may experience in the future, major power
shortages and blackouts. These blackouts could cause disruptions to our operations or the operations of our suppliers, distributors
and resellers, or customers. These events could seriously harm our revenue and financial condition, and increase our costs and
expenses.