Kodak to cut more jobs, digital camera casualties

Shares fall $4.41 to $33.18, biggest drop in 16 months

January 23, 2003|By BLOOMBERG NEWS

ROCHESTER, N.Y. - Eastman Kodak Co. will eliminate as many as 2,200 jobs as the slumping economy and consumers' shift to digital cameras hurts sales and profit at the biggest filmmaker. Kodak's stock yesterday had its biggest drop in 16 months.

Costs to fire workers will total as much as $100 million this year, Kodak said. Job cuts helped the company rebound to a profit in the fourth quarter, though results fell short of analysts' forecasts. The company said this quarter's profit will be about 13 cents a share, less than half the 28-cent average estimate of analysts in a Thomson First Call survey.

"Kodak is facing technological obsolescence as digital replaces film," said Lynn Yturri, who manages $450 million at Banc One Investment Advisors' One Group Equity Income Fund. "That's a big hurdle to overcome."

Digital photography contributed to a 3 percent decline in U.S. film sales in 2002 and will lead to a drop of about 5 percent this year, Chairman Dan Carp said on a conference call. Carp has tried to boost profit by using fewer workers to run factories and reducing manufacturing costs. Sales have dropped for three straight years as consumers travel less and take fewer pictures and price competition for film increases with Fuji Photo Film Co.

The job cuts are to take place this year and come primarily from Kodak's photo-finishing business in the United States and Western Europe. The move will save as much as $85 million annually and as much as $50 million in 2003, Kodak said.

The job cuts will reduce Kodak's work force by about 3 percent. The company cut 7,300 jobs last year and had 70,000 workers at the end of 2002.

Fourth-quarter net income was $113 million, or 39 cents a share, compared with a year-earlier loss of $206 million, or 71 cents. Sales rose 2.5 percent to $3.44 billion from $3.36 billion. Without currency exchange benefits, sales were unchanged, Kodak said.

Excluding costs for job cuts, asset impairments and write-offs and tax benefits, Kodak said, fourth-quarter earnings would have been 65 cents a share. The company had forecast profit of 60 cents to 70 cents, while analysts surveyed by First Call expected 68 cents. The year-earlier loss included job-cutting costs.

Kodak's shares dropped $4.41 to $33.18 on the New York Stock Exchange yesterday, their biggest drop since September 2001.

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