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 user 2007-05-08 at 12:16:00 pm Views: 40
  • #17945

    Kodak shares sink on quarterly loss
    N.Y.- Eastman Kodak Co. posted a smaller first-quarter loss Friday—its
    ninth quarterly deficit in the last 2 1/2 years—as it applies the final
    cost-cutting touches to a drastic digital makeover. The results still
    missed Wall Street expectations and its shares dipped nearly 5
    percent.The photography company lost $151 million, or 53 cents a share,
    in the January-March period versus a loss of $298 million, or $1.04 a
    share, a year ago when it took hefty charges tied to its massive
    overhaul.Sales fell 8 percent to $2.12 billion from $2.89 billion a
    year ago, hurt by Kodak’s move away from lower-priced cameras in favor
    of marketing pricier but more profitable models.Its overall digital
    sales fell 3 percent to $1.2 billion, while revenues from film, paper
    and other traditional, chemical-based businesses slumped 13 percent to
    $896 million.Excluding one-time items totaling $76 million, or 26 cents
    a share, Kodak lost $98 million, or 35 cents a share. Analysts surveyed
    by Thomson Financial had forecast a loss of 2 cents a share on sales of
    $2.1 billion.

    In last year’s first quarter, Kodak’s operating loss was $157 million, or 55 cents a share.
    shares fell $1.25, or 4.8 percent, to $24.72 Friday. They have traded
    in a 52-week range of $18.93 to $27.57.Now in the final stretch of a
    costly four-year shift away from its shrinking film business and into
    the highly competitive digital arena, Kodak has piled up $2.7 billion
    in restructuring charges and accumulated $2.1 billion in net losses
    over the last 10 quarters.Cost-cutting “is working and it’s progressing
    fast,” with costs dropping to 19 percent of revenues from 22 percent a
    year ago, said Ulysses Yannas, a broker with Buckman, Buckman &
    Reid in New York.”It’s been an awful four years,” he said. “That’s what
    happens when you make some mistakes in the past.”

    Many analysts
    think Kodak waited too long to acknowledge its analog businesses were
    in an irreversible slump. In September 2003, it finally outlined an
    ambitious strategy to become a digital heavyweight in photography and
    commercial printing by 2008.Kodak formally wrapped up the $2.35 billion
    sale of its 110-year-old health-imaging business to Canadian investment
    firm Onex Corp. on Monday. It has already paid down $1.15 billion in
    debt and plans to funnel some of the remaining cash into inkjet
    printers and other new digital ventures.The company said its trio of
    home printers, unveiled in February, produce documents and photos using
    ink cartridges that cost roughly half as much as the competition’s.
    Analysts think the move could trigger a price war in a market dominated
    by Hewlett-Packard Co.”Our new consumer inkjet business model has
    created a very attractive opportunity for Kodak and I intend to
    aggressively pursue it,” Chief Executive Antonio Perez, who helped
    develop HP’s lucrative inkjet-printer division, said in a conference
    call with analysts.Encouraged by consumer demand, Perez said he’ll sink
    up to $50 million more in the printer business this year—on top of
    about $400 million already invested. He expects to ship at least a
    half-million inkjet printers by year-end.That largely prompted Kodak to
    cut its full-year forecast for digital operating profits to $150
    million to $200 million from an earlier range of $200 million to $300
    million. Digital sales in 2007 were still expected to grow by 3 percent
    to 5 percent, it said.In February, the picture-taking pioneer said it
    was eliminating 3,000 more jobs—bringing its planned tally of layoffs
    to 28,000 to 30,000 since 2004. By year-end, its work force will slip
    below 30,000, less than half what it was just three years ago. Its work
    force peaked at 145,300 in 1988.Sales of consumer digital imaging
    products fell 14 percent to $778 million largely because of its
    emphasis on improving digital profit margins. Graphic communications
    sales eased 1 percent to $864 million.

    Film products sales fell
    8 percent to $458 million, a much smaller drop than in previous quarter
    as sales in its entertainment imaging unit rose 8
    percent.”Entertainment film is obviously of huge importance for them
    from a cash standpoint,” said analyst Shannon Cross of Cross Research
    in Short Hills, N.J.”For now, you’ve got a situation where your
    fundamentals are relatively weak but there’s still some future hope
    from the standpoint of entertainment not rolling over yet and inkjet. A
    lot of the long-term value-oriented shareholders are going to look past
    this quarter and look to the new opportunities as opposed to selling
    the stock right now.”