By BEN DOBBIN, AP Business Writer
ROCHESTER, N.Y. – Eastman Kodak Co. said Wednesday it is cutting as many as 10,000 more jobs as the company that turned picture-taking into a hobby for the masses navigates a tough transition from film to digital photography.
The lightning transition to a world without film is forcing an extreme makeover at the world’s biggest maker of the product and coincided with the disclosure of a second-quarter loss. The company’s shares dipped more than 2 percent.
On top of 12,000 to 15,000 layoffs targeted 18 months ago, Kodak is reducing its payroll by almost a quarter from where it stood in 2004, when a string of recent acquisitions is taken into account.
Kodak missed Wall Street forecasts by a wide margin, largely because of a steeper-than-expected slide in film sales – even in emerging markets such as China. It lost $146 million, or 51 cents a share, in the April-June quarter, compared to a profit of $136 million, or 46 cents, a year ago.
Revenue grew 6 percent to $3.69 billion from $3.46 billion in last year’s second quarter.
Excluding restructuring and research charges, plus $19 million in asset impairments from an investment in China’s Lucky Film Co., Kodak posted earnings from continuing operations of 53 cents a share. Analysts surveyed by Thomson Financial had forecast earnings of 80 cents a share.
“I don’t need to change our overall strategy – the further we get into this, the better the strategy looks,” Kodak’s new chief executive, Antonio Perez, said during a conference call with analysts. “But I need to dramatically accelerate some of the steps needed to get there.
“Sales of our consumer traditional products are declining faster than expected,” he said. “Although we have been moving rapidly to get our costs down … we are picking up the pace dramatically. This is what the company needs to succeed as a digital company.”
To fortify its swelling digital businesses, Kodak is slashing deeper than it set out to do in January 2004. The new cuts will include 7,000 manufacturing jobs, many in Kodak’s hometown.
“It’s a company now oriented toward having others make everything else for them, and concentrating on research and marketing,” said Ulysses Yannas, a broker for Buckman, Buckman & Reid.
Kodak plans to make as many 25,000 job cuts by the middle of 2007 and trim its traditional manufacturing assets to about $1 billion, down from $2.9 billion in January 2004. The company will also add about 8,000 employees, however, bringing its work force to under 50,000 people.
Kodak wrapped up an almost $3 billion shopping spree in January to expand its reach as a digital heavyweight in photography, medical imaging and commercial printing.
With the era of soaring sales and fat profits from chemical-based businesses now departed, Kodak expects digital technology to become its biggest source of revenue this year for the first time.
In the second quarter, sales of digital products and services in all its businesses rose 43 percent to $1.843 billion, helped by a sharp rise in sales of cameras, kiosks and thermal printers. In contrast, revenue on the analog side dropped 15 percent to $1.843 billion – exactly in line with digital sales.
Kodak said its digital sales in June exceeded traditional revenues for the first time ever. Hurt by falling traditional sales, even in China’s more affluent, coastal regions, Kodak now expects its traditional sales to plunge from 23 percent to 27 percent in 2005, compared with a 20 percent drop forecast in April.
Health imaging sales rose 3 percent to $694 million, reflecting better-than-expected traditional sales. Graphic communications sales soared 144 percent to $794 million, largely because of Kodak’s buyout this year of Sun Chemical Corp.’s 50 percent stake in a jointly owned commercial graphic-arts business.
Digital accounted for around $5.5 billion of sales in 2004, but could vault as high as $8 billion this year. Chemical-based businesses will account for around $6.6 billion, down from $8 billion in 2004.
Founded in 1881 by George Eastman, Kodak turned point-and-shoot photography into an overnight craze when it came out with a $1 Brownie camera in 1900. A century later, the swift shift to digital looked to have caught it off-guard. Kodak insists it was waiting for a mass market to clearly develop, and it has since captured the top spot in the U.S. point-and-shoot digital camera market.
“They’re No. 1 in just about everything they compete in except for commercial digital printing,” Yannas said. “They’re No. 1 in health care, in cameras, in home printers. Hewlett-Packard, IBM’s been doing the same thing. It’s a question of adjusting their model for the digital world.”
Kodak stock fell 64 cents, or 2.2 percent, to $28.10 in trading Wednesday on the
New York Stock Exchange.
source – Associated Press