EASTMAN KODAK

                                  8/18/93

              8/31/93 52-Wk-Rng FY/Q  EPS93  EPS94 PE94 NxtQtr LyQtr
Eastman Kodak   61.00   61-39   12/3   3.70   4.60 13.1  **.** **.** EK

.     Management has announced cash-flow and cost-reduction plan.
.     Excess cash flow expected to equal $2.6 billion in 1993-1995,
      substantially exceeding prior estimates.
.     Capital expenditures should now approximate depreciation.
.     Cost-cutting moves should be viewed as initial steps.

In a letter to shareholders released today, Mr. Kay Whitmore, Kodak's chairman
and CEO, outlined the details of a cash-flow and cost-reduction plan presented
to the board of directors on August 13.  We believe that the cash-generation
aspect of the plan is quite positive but view the cost- cutting steps as only
a start in reducing Kodak's high cost structure.  The cost-cutting effort is
likely to accelerate when a new chairman and CEO joins the company later this
year.  This is likely to occur as a result of the board of directors' decision
to ask Mr. Whitmore to resign because the speed and magnitude of his
cost-cutting plan was inadequate, in its opinion.   Overall, analysts that
the plan is an important step in Kodak's ongoing turnaround and increases
analysts confidence in a minimum earning power potential for the company of
$5-$6 per share.  Our 1993 and 1994 estimates of $3.70 and $4.60,
respectively, are unchanged.  We continue to recommend aggressive purchase of
the shares.

The background to the release of Kodak's letter to shareholders was that Mr.
Whitmore wanted to communicate with investors about the current status of
management's efforts to improve profitability and reduce debt. Therefore, the
plan announced today is his plan and does not reflect the initiatives that
might be taken by a new chairman and CEO.  There were several elements of the
plan, most important of which was that management estimated that free cash
flow (excluding Eastman Chemical Company, to be spun off in early 1994) would
approximate $2.6 billion 1993-1995.  The company indicated that free cash flow
in 1993 would total $700 million, $1.0 billion in 1994, and $1.1 billion in
1995.  These three numbers actually total $2.8 billion rather than $2.6
billion.  The difference is that the $700-million mistakenly included $200
million in excess cash flow from Eastman Chemical Company in 1993.  In any
case, the $2.6-billion figure is a sizable increase from the $1.0-billion
estimate discussed earlier this year, which included Eastman Chemical Company.
The bulk of the difference between these figures can be accounted for by a
sharp reduction in capital expenditures.  In 1992, Kodak spent $2.09 billion
on capital expenditures versus $1.39 billion in depreciation. Over the last
three years, Kodak's capital spending has outpaced depreciation by a wide
margin, averaging $2.08 billion.  This spending rate resulted in a 1990-1992
capital expenditure-to-depreciation ratio of 1.61 times.  Management has
indicated that capital spending will be reduced to match depreciation.  Based
on this reduction, excess cash flow generation will increase approximately
$500 million per year 1993-1995.  In the first half of 1993, capital
expenditures declined 27%, which implies a full-year spending rate of $1.53
billion.

A second element of the plan involved a 10,000 headcount reduction by the end
of 1995.  At the end of 1992, Kodak had 132,600 employees.  Earlier this year,
the company announced the termination of 2,000 employees in the imaging group.
Of the remaining 130,600 employees, Eastman Chemical Company accounts for
18,000.  The 10,000 headcount reduction announced by Mr. Whitmore refers to a
112,600 employee base excluding Eastman Chemical. It is clear that this 8.9%
reduction in headcount over a two-and-a-half year period was not satisfactory
to the board of directors because Mr. Whitmore indicated that the board
believes that the company needs to "move faster and further on operating cost
efficiencies," which is why he was asked to resign.

The two final components of the plan were selling, administrative,
distribution, and advertising (SADA) costs and research and development. In
1992, SADA equaled 29.1% of sales, with R&D at 7.2%.  Mr. Whitmore stated that
these expenses would be capped at 1992 levels of $5.86 billion and $1.58
billion, respectively.  As sales grow, a capping in SADA and R&D would allow
these expenditures to fall as a percent of sales.  However, analysts believe
that the board of directors insisted on more decisive action that would result
in an actual drop in these spending levels.  This would permit SADA and R&D to
more quickly fall into line with the ratios of peer group companies.  As we
have discussed in the past, there is significant earnings leverage available
to Kodak if these costs drop as a percentage of sales. For example, each
100-basis-point reduction in SADA and R&D would contribute incremental
earnings of approximately $0.35-$0.40 per share after tax.  Assuming that SADA
declines from 29.1% of sales in 1992 to 25.0% by 1995, earnings would benefit
$1.40-$1.60 per share.  Similarly, a 100-basis-point reduction in R&D spending
from 7.2% of sales in 1992 to 6.2% by 1995 would increase earnings an
additional $0.35-$0.40 after tax.