KODAK 1ST PROFITS AFTER YEARS OF LOSSES

[Anonymous]

Kodak posts first profit after years of losses
ROCHESTER,
N.Y. – After wading through a river of red ink for two years, Eastman
Kodak Co. finally hauled in a modest profit in the fourth quarter. For
the first time, it also generated more earnings from digital
photography and commercial printing than from its storied film
business.The world’s top maker of photographic film earned $16 million,
or 6 cents a share, in the October-December period. That compared with
a year-ago loss of $46 million, or 16 cents a share, when Kodak took
hefty charges linked to its mammoth, four-year digital overhaul, which
it aims to wrap up this year.Sales fell 9 percent to $3.821 billion
from $4.197 billion largely because of its emphasis on improving
digital profit margins, such as focusing more on the higher-end camera
market.Excluding one-time items, Kodak beat Wall Street expectations by
earning $169 million, or 59 cents a share, in the quarter.Analysts
surveyed by Thomson Financial had forecast earnings of 55 cents a share
but anticipated higher sales of $3.94 billion.The company’s shares rose
34 cents, or 1.33 percent, to close at $25.86 on the New York Stock
Exchange. They have traded in a 52-week range of $18.93 to $30.91.Kodak
had run up eight quarterly losses in a row since posting a profit of
$458 million in the third quarter of 2004. It has accumulated $2.7
billion in restructuring charges and $2 billion in net losses. And it
plans to eliminate as many as 27,000 jobs, with 23,300 already axed
through 2006.Its overall digital sales in the fourth quarter fell 5
percent to $2.45 billion, and revenue from film, paper and other
chemical-based businesses dropped 15 percent to $1.36 billion.Although
it made more money from traditional businesses last year — $423
million vs. digital’s $343 million — profit from the digital arena
shot up 92 percent in the fourth quarter to $271 million. Profit from
the older businesses totaled $98 million.”I think it’s a very clear
sign they’ve turned the corner,” said Ulysses Yannas, a broker with
Buckman, Buckman & Reid in New York. “You have declines in overall
sales but an increase in earnings, which means their cost-cutting
efforts are staying ahead of the curve.”Although film sales have been
shrinking by 20 percent to 30 percent in recent years, Yannas added,
the 15 percent contraction in the fourth quarter suggests Kodak is
benefiting from the demise of film operations at Japan’s Konica Minolta
and Belgium’s Agfa-Gevaert NV.Three weeks ago, Kodak said it was
selling its health-imaging business, created after the discovery of
X-rays in 1895, to Canadian investment firm Onex Corp. for as much as
$2.55 billion.Aside from paying down about $1.15 billion in debt, the
sale could help fund Kodak’s long-awaited entry next week into the home
inkjet-printer market dominated by Hewlett-Packard Co.”I’m very excited
with the new product introductions that we’ll talk about” at a meeting
with investors in New York on Feb. 8, Chief Executive Antonio Perez
said in a conference call with analysts.”I feel more excited than ever
with the possibilities of this company,” added Perez, who helped
develop Hewlett-Packard’s lucrative inkjet-printer business before
being hired by Kodak in 2003.Kodak has sunk more than $400 million into
its inkjet project, analysts estimated.”Inkjet represents an intriguing
profit opportunity. If you look at the existing players, the profits
run deep and wide,” said Matthew Troy, an analyst with Citigroup in New
York.”If Kodak can prove it can offer a product in a capital-efficient
manner, in the abstract it certainly makes sense. But I think to a
large degree, their timing is about two years behind hitting the sweet
spot of the market.”For 2006, Kodak’s net losses totaled $601 million,
or $2.09 a share, compared with a loss of $1.26 billion, or $4.38 a
share, in 2005. Sales fell 7 percent last year to $13.27 billion from
$14.27 billion in 2005.Even before shedding its health unit, which
employs 8,100 people, its workforce had dipped to 40,900 — a level not
seen since at least the Depression-era 1930s — from a peak of 145,300
in 1988.

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February 2, 2007 at 11:35 AM