Kodak is cutting 15,000 more jobs

Reduction over 3 years part of shift from film to digital imaging lines

January 23, 2004|By NEW YORK TIMES NEWS SERVICE

ROCHESTER, N.Y. - Facing a sharp drop in demand for conventional photographic film, Eastman Kodak Co. said yesterday that it was speeding its transition to digital imaging while cutting costs in its film business by eliminating up to 15,000 jobs worldwide, more than a fifth of its work force.

The job cuts will come over the next three years, and the company said it would take restructuring charges of up to $1.7 billion against its earnings during that period.

Worldwide sales of consumer film, one-use cameras and Advanced Photo System film stock fell 11 percent in terms of dollars and 15 percent in units in the fourth quarter compared with the corresponding quarter a year earlier, the company said.

In the United States, the shift to digital cameras was even more pronounced. Fourth-quarter sales declined 20 percent in dollars and 23 percent in unit volume.

Daniel A. Carp, Kodak's chairman and chief executive, told analysts at a meeting in New York that the company intended to cut fixed costs in its conventional silver haloid film business faster than volume falls.

Kodak expects its restructuring to provide annual savings of $800 million to $1 billion by 2007.

Since 1998 Kodak has cut about 22,000 jobs. It currently employs about 64,000 worldwide, 30 percent of them in Rochester, where an equal share of jobs will be cut.

Carp also said the company would concentrate on acquisitions that fit into its business plan, rather than on exotic ideas, for future profits. That comment appeared aimed at reassuring investors who watched the company spend billions of dollars on failed acquisitions over the past two decades.

Wall Street was encouraged by Kodak's moves yesterday. The company's shares jumped $3.49, or 12.7 percent, to close $30.95 on the New York Stock Exchange.

Over all, Kodak's digital businesses - including medical and scientific imaging - are profitable, said Kodak spokesman Gerard Meuchner.

He declined to identify which digital units might not be profitable, but said the company was confident each would become so as investments in them generate more sales and efficiencies.

Kodak also reported yesterday that its fourth-quarter profit fell 83 percent, to $19 million, or 7 cents a share, from $113 million, or 39 cents a share, from a year earlier. Excluding one-time items, however, Kodak earned $199 million, or 70 cents a share, in the latest quarter.

Overall sales rose 10 percent in the fourth quarter, to $3.78 billion, from $3.44 billion a year earlier.

Emphasizing that it believes it is successfully remaking itself into a digital imaging leader, Kodak said its Easy Share digital cameras were the top-selling consumer cameras of any type in the United States during the Christmas selling season.

Kodak pointed to a Web unit, ofoto.com, as an example of its new success. The service enables customers to send digital images over the Internet and get conventional silver haloid prints back in the mail. Kodak recently began marketing ofoto.com in Europe.

For decades, the company had a virtual monopoly on color film that generated huge profits. But as competitors emerged, including Agfa in Europe and Fuji in Japan, Kodak's profit margin eroded.

One sign of its focus on investing in existing profitable businesses that fit into its business plans, Kodak pointed out, was a $35 million tender offer it announced yesterday for the remaining 41 percent stake in a Japanese digital camera supplier, Chinon Industries, that Kodak doesn't already own.

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