                               EASTMAN KODAK

                                  10/28/93

             10/27/93 52-Wk-Rng FY/Q  EPS93  EPS94 PE94 NxtQtr LyQtr
Eastman Kodak   62.25   62-39   12/3   3.35   4.50 13.8  **.** **.**


.      Continue to recommend purchase with a price objective of at least
       $75 per share.
.      Mr. Fisher's first priority is to get Kodak's "financial house in
       order."
.      Intends to infuse new talent into the organization.
.      Search for a new CFO will be primary focus near term.
.      Expanding core competency in imaging is a key long-term strategy.
.      Mr. Fisher's compensation package tied heavily to Kodak's stock
       performance.

At a recent analysts' meeting, Mr. Fisher addresses several of the issues that
must be resolved to significantly improve Kodak's profitability.  First, he
emphasized that the company's financial house must be put in order.  While he
did not detail the specific steps needed to accomplish this goal, he did
indicate more had to be done to improve cash flow and increase the company's
return on net assets, which he viewed as inadequate.  Since Mr. Fisher does not
join the company until December 1, he felt it inappropriate to go much further.
It is clear, however, Mr. Fisher will have to aggressively attack Kodak's high
cost structure to achieve his financial goals.  In fact, Kodak's board of
directors indicated previously that Mr. Whitmore's inability to reduce costs
was one of the prime reasons for his dismissal.  Second, Mr. Fisher expressed a
strategic objective to build on the company's core imaging competency.  In
fact, he described Kodak as a "master of the universe" in capturing and
distributing images.  In his opinion, an exploitation of this core competency
could allow Kodak to become a key contributor to the "information superhighway"
currently being assembled throughout corporate America.  Third, he believes
Kodak must focus more on customer needs to improve quality and insure that
technology development is in tune with marketplace needs.  In short, new
product introductions should not be too visionary. Finally, he does not believe
that corporate culture can be transferred from one company to another. However,
he did discuss the constructive dissension aspect of the Motorola culture in a
positive light.

In reply to a question regarding Kodak's non-imaging businesses, Mr. Fisher did
comment that the health group had some interesting core competencies. However,
analysts did not sense the same enthusiasm for this business as was so evident
with his comments on imaging.

Mr. Fisher was asked about the size and structure of his compensation package,
but he declined to be specific.  He did indicate that the primary difference
between his financial package at Motorola and Kodak was the size of the stock
option grant at Kodak.  In other words, his compensation is tied heavily to the
performance of Kodak's stock.  This aligns Mr. Fisher's interests closely with
shareholders.  We believe it represents a smart decision by Kodak's board of
directors.

Kodak is in four primary businesses, including imaging, health, information
systems, and chemicals.  Typically, the imaging group accounts for more
than 50% of operating earnings.  In June, the company announced that the
chemical group would be spun off to shareholders on a one-for-one basis.
This spinoff should occur by yearend.

Key Investment Points

.      Kodak has an excellent core film business that dominates the U.S.
       market and remains the market leader worldwide.  Although future
       film unit growth might be somewhat slower than the historical rate
       of 5% (perhaps 2%-4%), cost-cutting should enable imaging earnings
       (an estimated 51% of 1993 operating earnings) to grow 10%-12% over
       the next several years.  Given the flat price environment for film
       in the last two years, we do not believe that branded film prices
       will come under pressure, as has occurred with other consumer
       products.  The risk from electronic imaging, or the filmless
       camera, was reduced significantly with the introduction of Kodak's
       Photo CD in mid-1992.

.      The decision by Kodak's board of directors in July to replace Chairman
       and CEO Kay Whitmore signals that the company is poised for a
       turnaround.  The board indicated that a new chairman and CEO would join
       the company before yearend.

.      The board's primary dissatisfaction with Mr. Whitmore was the timing
       and magnitude of proposed cost reductions.  At the conference call
       announcing the board's decision, John J. Phelan, retired chairman
       and CEO of the New York Stock Exchange, stated that cost-cutting
       was not an "integral" part of Kodak's management style and that "it
       must become so."  He specifically mentioned that selling,
       advertising, distribution, and administration (SADA) expenses were
       too high.  He also suggested that Kodak tended to "throw money at a
       problem to solve it."  This language indicates that outside board
       members have strongly held ideas on how new management should lower
       Kodak's high cost structure.

.      The magnitude of the cost savings could be substantial.  In 1987,
       Kodak's SADA expenses equaled 24.0% of sales versus 29.1% in 1992.
       Based on Kodak's nearly $20.0-billion sales base, each 100-basis-
       point change in SADA or any other expense ratio impacts earnings by
       $200 million pretax, or $0.35-$0.40 per share after tax.  In our
       opinion, a reasonable objective for SADA expenses by the end of
       1995 is 25.0%, which is in line with 3M's 1990-1992 average.  A 400-
       basis-point SADA decline to 25.0% from 29.0%  would boost earnings
       $1.40-$1.60 per share.  In addition, research and development (R&D)
       expenditures were 7.9% of sales in 1992 versus an average of 7.2%
       over the last five years.  We believe that a reasonable 1995
       objective is 6.0%, which would contribute incremental profits of
       $0.70-$0.80 over a two-year period.  In aggregate, SADA and R&D
       cost reductions could add $2.10-$2.40 to Kodak's earnings by the
       end of 1995.  Using 1992 earnings of $3.26 as a base, this would
       imply earnings of $5.51 assuming no sales growth.

.      In a letter to shareholders in August, Mr. Whitmore outlined the
       details of a cash flow and cost-reduction plan.  While the cost-
       reduction portion of the plan was inadequate, the cash flow
       estimates were actually quite positive.  Management estimated that
       free cash flow (excluding Eastman Chemical Company) would
       approximate $2.6 billion in 1993-1995.  Of this total, $500 million
       would be generated in 1993, $1.0 billion in 1994, and $1.1 billion
       in 1995.  On a per-share basis, excess cash flow in these years
       would equal $1.50, $3.00, and $3.35, respectively.  We note that
       this plan was developed by Mr. Whitmore and does not reflect the
       initiatives that are likely to be taken by a new chairman and CEO.


