Kodak posts loss, plans up to 4,500 job cuts

/ Source: The Associated Press

Eastman Kodak Co. said Thursday it is cutting 3,500 to 4,500 jobs, or 14 percent to 18 percent of its work force, as it posted a fourth-quarter loss of $137 million on plunging sales of both digital and film-based photography products. Its stock tumbled more than 23 percent.

The 129-year-old photography pioneer said its loss in the October-December period amounted to 51 cents a share. That compares with a year-ago profit of $215 million, or 75 cents a share.

Sales slumped 24 percent to $2.43 billion from $3.22 billion a year ago, hit by a sharp slowdown in demand for digital cameras and inkjet printers, lower royalties from patents and unfavorable foreign exchange rates.

Digital revenue dropped 23 percent to $1.78 billion and traditional film-based revenue fell 27 percent to $652 million.

Excluding restructuring charges and one-time items totaling $112 million, or 42 cents a share, the loss came to $21 million, or 8 cents a share. Analysts surveyed by Thomson Reuters expected, on average, a far bigger profit of 21 cents a share on higher sales of $2.81 billion.

Kodak’s share price dropped to a decades-long low during the session.

“Consumer digital was a disaster area — it’s the economy, unquestionably,” said Ulysses Yannas, a broker for Buckman, Buckman & Reid in New York. “Long-term, I’m not gloomy about this company but it’s suffering a helluva lot of pain.

“There was a point when Kodak had too many people. Now it’s going the other way, shedding the bulk of manufacturing” as it turns into “an intellectual property and marketing operation. I don’t see that there’s any fat left, which says that when and if this thing turns around, you’re going to have a wild ride.”

Converting the bulk of its business from high-margin film to more competitive electronic technology cost Kodak $3.4 billion from 2004 through 2007. It chopped its global work force from 64,000 to 24,400 at the end of 2008, with about two-thirds of its 12,800 U.S. employees based in Rochester.

The latest cuts that Kodak aims to complete in 2009 could trim its ranks to 19,900, a level not reached since the 1930s Depression era. Its payroll peaked at 145,300 in 1988.

“The second half of 2008 will go down in history as one of the most challenging periods we have seen in decades,” Kodak’s chief executive, Antonio Perez, said in a statement.

“We built significant momentum following the completion of our corporate transformation and our business results were on track through most of 2008, with digital revenue up 10 percent in the first half of the year. ... However, during the last three months of the year, we experienced dramatic declines in several of our key businesses due to the slowdown in consumer spending and significantly reduced demand for capital equipment.”

In all of 2008, Kodak earned $339 million, or $1.20 a share, down 50 percent from $676 million, or $2.35 a share, in 2007. Sales fell 9 percent to $9.42 billion from $10.3 billion.

In December, Kodak withdrew its full-year 2008 operating profit and sales forecast because of the global recession and stronger dollar and said executives would miss out on salary hikes in 2009.

Its consumer digital imaging division absorbed a $40 million operating loss in the quarter compared with a year-ago profit of $91 million as sales slid 30 percent to $958 million from $1.37 billion. Sales of inkjet printers doubled to around 1 million in 2008 but fell short of a top-range target of 1.5 million.

Hurt by a softer commercial printing market, graphic communications posted a $4 million operating loss, compared with a $30 million profit a year earlier, as sales fell 14 percent to $821 million.

The film, photofinishing and entertainment unit more than doubled its operating profit to $39 million from $17 million despite a 27 percent drop in sales to $652 million. Sharp cost reductions and lower retiree benefits were partially offset by a slide in consumer film sales and higher silver costs.

Through 2011, Kodak has said it expects revenue to rise 5 percent a year, driven by a 10 percent to 12 percent annual rise in digital sales. Operating profit, it forecasts, will more than triple to $1 billion.