Kodak to Slash Up to 15,000 Jobs

Discussion in 'Economics' started by misctrader, Jan 22, 2004.

  1. Kodak to Slash Up to 15,000 Jobs

    Thu 11:25am ET - Reuters
    Eastman Kodak Co. said on Thursday it will slash up to 15,000 jobs and take up to $1.7 billion in charges over three years as the photography company works through a painful shift toward digital products and away from the waning film market.

    Shares of Rochester, New York-based Kodak, which also announced an 83 percent decline in fourth quarter net income, rose about 4 percent in pre-market trade on Thursday.

    Kodak said it would cut 12,000 to 15,000 jobs worldwide, or about 20 percent of its work force, which it expects will save $800 million to $1 billion by 2007. The move follows a risky decision in September to shift investment into digital markets such as production printing and health imaging.

    "Obviously when you have to lay off as many people as we have, that's gut wrenching, but we know we are doing it for the better good of the whole company," Kodak Chief Executive Daniel Carp said in an interview with Reuters.

    Kodak has shed some 22,000 jobs in the last 5 years, down to about 64,000 in 2003 from 86,000 in 1998. The new cuts will be offset somewhat by new employees that come in via acquisition.

    Shrinking Kodak's manufacturing structure is key to its plan of creating a smaller, more profitable operation focused on high-growth products. But it must initiate change even as it watches film sales, its chief revenue generator, decline.

    "Kodak's move to cut jobs and refocus more intently on digital technology is positive news and the shares should rise at the open," said Steve Previs, a dealer at Jefferies International. "Its film business has razor-thin margins and more revenues from digital should boost profits."

    For the fourth quarter of 2003, Kodak posted net income of $19 million, or 7 cents a share, down sharply from $113 million, or 39 cents a share, a year earlier.


    Excluding one-time items, Kodak reported earnings were $199 million, or 70 cents per share. The earnings included a positive impact of 11 cents a share related to employee-benefit and incentive-compensation accruals reported in prior quarters.

    Analysts had expected 52 cents per share on average, according to Reuters Research, a unit of Reuters Group PLC.

    Sales in the fourth quarter totaled $3.78 billion, up 10 percent from $3.44 billion a year ago. Excluding the positive effect of the weak dollar, which boosts the value of overseas sales when they are converted into dollars, sales increased 4 percent.

    The company reported quarterly revenue growth in many of its digital units, including digital cameras and online photofinishing. It said for the full year, worldwide consumer film industry volumes declined by about 8 percent.

    Looking ahead, Kodak forecast 2004 net earnings of 80 cents to $1.30 per share, and operating profit of $2.25 to $2.55 per share. It sees sales at $13.8 billion to $14.2 billion.

    For the first quarter, earnings on an operational basis are expected to be even with the year-ago period, it said.

    Kodak said that in the restructuring, it would reduce its total facility square footage by about one-third, building on current initiatives to consolidate operations and dispose of assets. The moves would result in charges of $1.3 billion to $1.7 billion over the next three years.

    While film still provides ample revenue for Kodak -- over 120 million rolls of film are sold each year industry-wide -- its traditional consumer film business has eroded under competition from rivals such as Japan's Fuji Photo Film Co Ltd. (Tokyo:4901.T - News) and more recently from digital photography.

    Separately, Kodak also launched a $35 million tender offer to buy the remaining shares in Japanese digital camera supplier Chinon Industries (Tokyo:7738.T - News) that it does not already own. It said it would consolidate its Japanese research and development operations with those of Chinon.

    It has also made a number of acquisitions recently to broaden its product offerings, such as Scitex Corp.'s (NasdaqNM:SCIX - News) digital printing unit, medical imaging company Algotec Systems Ltd., television post-production company Laser-Pacific Media Corp. (LPAC.O.) and PracticeWorks Inc. (Nasdaq:pRWK - News), which makes software for dental practices and medical imaging systems
  2. Do you have any insight into their strategy to diversify away from film into other areas and if so, does this mean that strategy is not doing well?