Kodak sets new round of job cuts

February 09, 2007|By Bloomberg News

ROCHESTER, N.Y. -- Eastman Kodak Co. will eliminate as many as 5,000 more jobs than originally planned as it accelerates its withdrawal from the consumer film business.

The world's biggest photography company said yesterday that it now expects job cuts to total 28,000 to 30,000, shrinking the work force to about half its size four years ago, compared with an earlier forecast of 25,000 to 27,000. That will boost restructuring costs to as much as $3.8 billion, Kodak said.

Chief Executive Officer Antonio Perez is stepping up his restructuring plans to deliver on his promise to complete Kodak's transformation into a digital company this year amid slumping film demand. The additional cuts are being driven by the sale of Kodak's health-imaging unit, the company said. Perez began the revamping in 2004 and has so far sliced 23,400 jobs at a cost of $2.7 billion.

"The metamorphosis they're going through is going to take longer," said Rusty Robinson, president of Robinson Investment Group in Brentwood, Tenn., which has been selling Kodak shares and currently owns more than 27,000. "I feel better, I don't feel great."

Restructuring will cost the company $575 million to $625 million this year. Kodak eliminated 1,200 jobs in the fourth quarter as it posted its first profit in more than two years.

"The most important thing for me is to complete this transition," Perez said yesterday at a meeting with investors in New York. "I want the $500 [million] to $600 million we keep using every year to do the layoffs to remain in our pockets starting 2008."

Shares of Kodak fell 69 cents to close at $26 yesterday on the New York Stock Exchange.

Kodak said it is targeting gross profit margins of 28 percent to 29 percent by 2009, compared with the 25.5 percent last year, which excludes the health unit's contribution. Earnings from operations will make up 8 percent to 9 percent of revenue in two years, compared with 2.6 percent last year.

Revenue, excluding the health group, which Kodak is shedding, will be $10 billion to $10.4 billion this year, compared with $10.8 billion in 2006. Gross margins will be 25 percent to 26 percent.

The company said it expects digital earnings from operations of as much as $300 million this year, on revenue growth of 3 percent to 5 percent, as Perez starts selling inkjet printers and licenses more technology.

The new cuts mean Kodak might eliminate as much as 15 percent of its global work force this year, leaving about 35,000 workers, said spokesman Dave Lanzillo. That's about a quarter of the company's 145,300 employees in 1988.

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