Kodak posts 2Q loss of $282 million
ROCHESTER, N.Y. – Eastman Kodak Co., scrambling to squeeze bigger profits from digital photography, posted its seventh quarterly loss in a row Tuesday and moved to axe 2,000 more jobs as it navigates a historic shift away from its waning film business. Its shares tumbled nearly 14 percent to their lowest close in 15 years.Largely because of $214 million in restructuring costs, Kodak lost $282 million, 98 cents a share, in the April-June quarter, close to double its loss of $155 million, or 54 cents a share, in last year’s second quarter.Stung by a continuing rapid slide in sales of silver-halide film, Kodak’s cash cow for much of the 20th century, revenues fell 9 percent to $3.36 billion from $3.69 billion a year ago.Excluding one-time items, Kodak lost $54 million, or 19 cents a share.Kodak has struggled to turn profits even while becoming a major player in recent years in the digital arena. With digital-imaging sales now outpacing those from film, paper and other chemical-based products, the 126-year-old photography icon is trying to find ways to spin out larger profits from newly dominant markets.”They have reached a critical mass in digital sales, which means they don’t have to aggressively pursue sales through price cuts and can focus on profitability,” said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York.As part of that strategy, Kodak said Tuesday it is shifting manufacturing of digital cameras to Flextronics International Ltd. and transferring 550 employees to the Singapore-based company.Those will be among 2,000 jobs that Kodak is aiming to eliminate by the end of next year – on top of 22,000 to 25,000 jobs already targeted since January 2004.Kodak did not disclose where the other layoffs would be made, but analysts think most are associated with its tightening of global sales operations and its $1.8 billion buyouts last year of Canada’s Creo Inc. and Sun Chemical Corp.’s 50 percent stake in Kodak Polychrome Graphics.Kodak’s stock fell $3.05, or 13.7 percent, to close at $19.20 on the New York Stock Exchange – its lowest close since it finished at $19.17 on July 24, 1991. More than 50 percent of the shares are owned by long-term institutional investors.The selloff, analysts said, was largely triggered by Kodak’s projection that weaker digital revenues will now result in a 3 percent drop in overall sales this year – down from earlier forecast ranging from a 2 percent fall to a 4 percent gain.In the quarter, overall digital sales rose 6 percent to $1.83 billion, while revenues from film, paper and other traditional, chemical-based businesses slumped 22 percent to $1.52 billion. Profits from digital businesses totaled $4 million, compared with a $25 million loss in last year’s second quarter.Kodak reaffirmed that it expects to post an overall operating loss of $500 million to $850 million in 2006 and earn $350 million to $450 million from digital operations. But it lowered its forecast for digital sales growth to around 10 percent from a range of 16 percent to 22 percent.”We are coming into the final stages of our digital transformation,” said Kodak’s chief executive, Antonio Perez. “By the end of next year the majority of the restructuring costs will be behind us and Kodak will be positioned for sustained success in digital markets.”The Flextronics deal, Perez said in a conference call with analysts, “is a big step on that path in our digital camera operations,” whereby the Asian electronics manufacturer will build and distribute Kodak’s consumer digital cameras but Kodak will hone in on sales, design and advanced research.A year ago, Kodak disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004. It has already cut 20,500 jobs, including 1,630 in the quarter.Health imaging sales fell 6 percent to $655 million, and operating earnings dipped to $78 million from $109 million, partly because of costs associated with exploring a partnership, an outright sale or other options for the 110-year-old business.Film and photofinishing sales slumped to $1.15 billion from $1.5 billion a year ago while operating profits dropped to $113 million from $244 million.In contrast, graphic communications sales jumped 14 percent to $908 million and operating earnings reached $22 million, compared with a loss of $42 million a year ago.Kodak acknowledged in 2003 that its analog businesses were in irreversible decline and outlined an ambitious strategy to become a digital heavyweight in photography, medical imaging and commercial printing by 2007.The transition triggered nearly $3 billion in acquisitions. But the shutdown of film and other manufacturing operations looks likely to drop its global work force below 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988.—On the Net: http://www.kodak.com
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