KODAK:IT’S BEEN AN AWFUL 4 YEARS

[Anonymous]

Kodak shares sink on quarterly loss
ROCHESTER,
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.
Its
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.”

[Author]

May 8, 2007 at 12:16 PM