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 user 2009-07-10 at 12:22:06 pm Views: 37
  • #22347
    Kodak CEO Bets Big on Printers,Perez Says Cash Sufficient as Photography Icon Tries to Crack Inkjet Market
    Eastman Kodak Co. Chief Executive Antonio Perez said the embattled company is now in position to generate enough cash to survive, having suspended its dividend and cut more jobs.
    Mr. Perez said, in a meeting with The Wall Street Journal, that there are recent signals that business conditions are improving, but “growth won’t return until 2011.”Kodak CEO Antonio Perez, shown in February, said customers are buying more inkjet cartridges than expected.The camera and printer maker’s painful plan for refocusing on digital markets was just getting traction last year when the economic downturn hit, slamming consumer spending in the Christmas season and squeezing credit for Kodak’s commercial-printing customers.Kodak’s sales plunged 24% in the fourth quarter and 29% in the first quarter. The company forecast it would lose up to $400 million from continuing operations this year. Its cash reserves fell 39% to $1.31 billion at the end of the first quarter.But Mr. Perez said Kodak’s “cash position now is fine” and if business recovers the company won’t have any issue with liquidity. He added that Kodak has “plenty of options… if we think the fourth quarter will be lousy.”

    Although Kodak shares are trading near all-time lows, below $3 apiece, Mr. Perez is confident he would find investors eager to help Kodak recapitalize and continue operations, if needed.Kodak is counting on two new products to help it grow and return to profits starting in 2011: a consumer inkjet printer and a very fast digital-inkjet printer for catalogs and direct mailers.Mr. Perez said the consumer printer is performing better than Kodak originally expected because customers are buying about eight ink cartridges a year, double the industry norm.Kodak designed its inkjet printers with expensive silicon technology inside the machine, rather than on individual ink cartridges. The change means that while Kodak’s printers, priced at $149 to $299 each, cost 30% more than rivals such as Hewlett-Packard Co., it can offer ink cartridges at lower prices.

    The company markets its printers to people who do lots of printing and resent paying high-prices for ink. Kodak sells ink cartridges for about $25. List prices for competitors’ cartridges average $47 and up.Still the company needs to expand the installed base of its printers before there are enough buyers of the high-margin ink cartridges to bolster profits.

    Last year, Kodak sold 793,000 of its All-in-One printers, less than 1% of the world-wide market of 92 million sold, said Larry Jamieson, printer analyst for Lyra Research, a market research firm. Kodak has said in the past that it would eventually like to capture as much as 10% of the market.In the commercial-printing business, the company is pushing a new digital-inkjet printer called Stream that will start selling in volume next year. Analysts say that the machine’s output is almost as good as offset presses.

    While he remains cautious, Mr. Perez said retailers the company deals with “believe Christmas will be much better than last Christmas.” Kodak, which sells many of its digital cameras in Wal-Mart Stores, specializes in low-priced, point-and-shoot digital models.He said retailers have been telling Kodak that they think the second quarter “is the bottom” for the economic downturn. “We all expect the third quarter will be a little better,” he added.Ron Glaz, an analyst with market research IDC, said unit sales of digital cameras are likely to be down 4% to 5% world-wide this year from 138 million last year. He said the dollar decline is likely to be sharper because “cameras are about 30% cheaper and for $100 you can get a really good one.