Kodak's Financial Officer
                   Quits in Rift With Chief
                   Steffen's Move, After Clash
                   Over Strategy, Prompts
                   Nose Dive in Stock Price
                   By Joan E. Rigdon and Gautam Naik

                   The Wall Street Journal
                   PAGE A3
                   (Copyright (c) 1993, Dow Jones & Co., Inc.)

                   Christopher J. Steffen, hailed by investors as the white-knight chief
                   financial officer who could save stodgy Eastman Kodak Co., resigned
                   abruptly following a confrontation with his boss.

                   Chairman Kay R. Whitmore and Mr. Steffen clashed on how quickly to
                   sell assets and cut costs, and how much say managers at the Rochester,
                   N.Y., photography company should have in those matters. Mr. Steffen,
                   who wanted to move swiftly and authoritatively, had been on the job for
                   less than three months and was expected to be named to the board at the
                   annual meeting May 12.

                   The news sent Kodak shares plunging $5.125, to $47.25, in composite
                   trading on the New York Stock Exchange, knocking $1.7 billion off the
                   company's market value -- about half the amount it had risen since Mr.
                   Steffen was named chief financial officer in January. Analysts who had
                   turned bullish on the stock because of Mr. Steffen were in shock. B. Alex
                   Henderson of Prudential Securities had three words of reaction: "stunned,
                   dismayed, disheartened."

                   In an interview, Mr. Whitmore said Mr. Steffen simply walked into his
                   office late Tuesday and announced his departure. In a terse statement,
                   Mr. Steffen, who couldn't be reached to comment, said, "The company
                   and I disagree on the approach to solving its problems." The 60-year-old
                   Mr. Whitmore said the two agreed on goals, but not on how to achieve

                   The conflict between the two executives was the subject of a page one
                   article in yesterday's Wall Street Journal.

                   Last night, Mr. Whitmore met with analysts at the St. Regis Hotel in New
                   York, a meeting that Mr. Steffen, 51, was originally scheduled to host.

                   "He left today because of this meeting," Mr. Whitmore said. "He wasn't
                   ready to come down here and tell you he's unhappy."

                   Acknowledging their power struggle, Mr. Whitmore told the analysts, "I
                   said to Mr. Steffen I'm chief executive, this is how I want to do it. Let me
                   make my stab at making my process work." Mr. Whitmore explained that
                   Mr. Steffen was approaching Kodak's problems from a purely financial
                   perspective, while Mr. Whitmore insisted on considering other issues
                   such as research, product development and market share for various

                   Mr. Whitmore added: "He's got a better track record than I have, but
                   he's never been a chief executive."

                   Mr. Whitmore, who said earlier in the day that he retained a management
                   consultant and investment bankers to reduce debt quickly and increase
                   shareholder value, promised the analysts that he would deliver a new
                   financial plan by September, at the latest.

                   Reactions were mixed. After the meeting, Wertheim Schroder analyst
                   Michael Ellmann said "the possibility of fairly radical change . . . is intact."
                   Goldman Sachs & Co. analyst Jack Kelly was more skeptical: "Steffen's
                   departure raises the risk that Kodak's plan will not be implemented

                   Wall Street isn't convinced that Mr. Whitmore, who had been urged by
                   his board to bring in an outsider when he hired Mr. Steffen, is up to the
                   challenge. "The market thinks the wrong guy resigned," said Ralph
                   Whitworth, president of the United Shareholders Association, a
                   Washington shareholder activist group.

                   Michael Price, president of Mutual Shares, which owns one million
                   Kodak shares, said Kodak's "shareholders have to look to the board to
                   do the right thing." He said he hopes the few executives on Kodak's
                   board "understand that this is the 1990s and what happened at American
                   Express," where James Robinson was effectively forced to retire by angry
                   shareholders, could happen at Kodak.

                   First Boston analyst R. Jackson Blackstock was more blunt. "Either
                   board members get Whitmore to deliver results or they deliver
                   Whitmore's head."

                   Directors couldn't be reached for comment. But Mr. Whitmore insisted in
                   the interview that board members didn't criticize him for Mr. Steffen's
                   departure, and that they simply urged him again to find a new outside
                   chief financial officer. The search could take months, but Mr. Whitmore
                   doesn't have much time. "I need someone badly," he said.

                   Mr. Whitmore, who values consensus and resists layoffs, clashed with the
                   brash Mr. Steffen, who boasted of his success helping turn around
                   Honeywell Inc. in the late '80s and, Chrysler Corp. before that. The two
                   agreed that they needed to cut costs, but disagreed on how. Earlier this
                   year, Mr. Whitmore announced 2,000 layoffs, but Mr. Steffen has told
                   analysts that move was a "drop in the bucket."

                   Mr. Whitmore said he was momentarily speechless when Mr. Steffen told
                   him he was quitting. He recalled Mr. Steffen saying: "I don't think I'm
                   going to be able to make the kind of contribution I'd like to make and
                   therefore I will leave." Mr. Whitmore added: "When I got so I could
                   speak, I said, `I don't believe that.'"

                   For a half-hour to an hour following the clash, Mr. Whitmore said, he and
                   two group presidents -- Leo J. "Jack" Thomas, imaging president, and
                   Wilbur J. Prezzano, health president -- tried to dissuade Mr. Steffen, but
                   to no avail. Mr. Thomas and Mr. Prezzano declined to return phone calls.

                   Mr. Whitmore said he and Mr. Steffen, who Rochester wags called "cut
                   and slash," disagreed on "methodology." "He wasn't fully comfortable
                   with the methodology I was using, with how much management buy-in
                   {we needed} to go forward," Mr. Whitmore said.

                   Mr. Whitmore didn't elaborate, but Mr. Price of Mutual Shares said that
                   when he visited Kodak two weeks ago, Mr. Whitmore told him: "The
                   train is leaving the station, and Chris has to get on our train." Mr. Price
                   said, "I think he meant that he and his other three senior executives had a
                   game plan, and Mr. Steffen had his own ideas."

                   Tuesday night and yesterday morning, Mr. Whitmore called each board
                   member to inform them, starting with John J. Phelan Jr., chairman of a
                   new corporate directions committee that was formed earlier this year to
                   increase shareholder value. Mr. Phelan, who didn't return phone calls,
                   urged the chairman to find a new outside chief financial officer, Mr.
                   Whitmore said.

                   "I thought I had the right person. I'm very disappointed that it turns out I
                   don't have the right person. I will go out again and try and find the right
                   person," Mr. Whitmore said.

                   For the past two years, the board has been putting pressure on Mr.
                   Whitmore to perform. During one board meeting in February 1991, Mr.
                   Phelan needled Mr. Whitmore about Kodak's poor earnings, said a
                   person who was present. Mr. Phelan reminded Mr. Whitmore that
                   Kodak had been blaming poor results on the economy, but with the
                   economy improving, Kodak should do better. Specifically, Mr. Phelan
                   said Kodak should implement plans to produce earnings of $5 a share for
                   the next year, 1992. Kodak missed: Earnings that year were $3.53 a
                   share after restructuring charges.

                   Investors have been urging a major shake-up at Kodak, which has
                   restructured numerous times yet failed to improve earnings. Earnings
                   peaked in 1988. With fierce competition from private-label film
                   producers and archrival Fuji Photo Film Co., Kodak can no longer rely
                   on its core film product to offset slow growth in other businesses, such as

                   Some analysts and money managers believe Mr. Steffen's departure is no
                   great loss because he's already instilled a sense of urgency in Mr.
                   Whitmore and the board. Mr. Blackstock of First Boston, for one, said
                   he continues to recommend the stock. And said Dean Witter analyst
                   Eugene Glazer: "He was CFO. Not CEO." He added, "This is not a sick,
                   sick company. It's a company that's eroding, but it's not deep down sick."

                   Yesterday, Kodak reported a first-quarter loss of $1.88 billion, or $5.75
                   a share, after a one-time charge of $2.03 billion for an accounting change
                   and a $21 million continuing accounting charge. In the year-earlier
                   quarter, Kodak had net income of $297 million, or 92 cents a share, after
                   a gain from an accounting change.

                   Excluding the charges, earnings in the recent quarter were $149 million,
                   or 46 cents a share, 3% higher than the year earlier's $145 million, or 45
                   cents a share. Sales rose slightly to $4.44 billion.


                   Gabriella Stern and Randall Smith contributed to this article.


                      Back to Joan's clips