Digital revenue drives Kodak profit up (AP)
By BEN DOBBIN, AP Business Writer 29 minutes ago
ROCHESTER, N.Y. - The final cost of Eastman Kodak Co.'s four-year overhaul is in: $3.4 billion to close aged factories and eliminate 29,000 jobs as it raced to convert the bulk of its century-old business from silver-halide film to digital photography.
Kodak said Wednesday it finished 2007 with a surge in its fourth-quarter profit, propelled chiefly by a bump in sales of digital cameras, retail kiosks and patented technology as well as a promising launch in the lucrative inkjet printer market.
Earnings climbed to $215 million, or 71 cents a share, in the October-December quarter, up from $16 million, or 6 cents a share, a year earlier.
Sales rose 4 percent to $3.22 billion from $3.11 billion a year earlier.
Excluding one-time items of $28 million, or 9 cents a share, operating profits came to $120 million, or 40 cents a share. That was below the 52 cents a share forecast by analysts polled by Thomson Financial. But the sales topped analysts' consensus estimate of $3.1 billion.
Kodak shares, which had skidded to a 30-year low of $16.66 in mid-January, lost 62 cents, or 3.1 percent, to $19.83 in late afternoon trading.
"The large, expensive and difficult corporate restructuring is over," Chief Executive Antonio Perez said in a conference call with analysts. "We have now established a sustainable business model for the decline in (our) traditional business and our digital businesses are growing profitably."
Digital sales rose $288 million, or 15 percent, to $2.26 billion in the quarter, while revenue from film, paper and other traditional, chemical-based products also fell by 15 percent to $951 million from $1.12 billion.
Digital profits edged up to $146 million from $141 million while earnings from film products slumped 52 percent to $40 million from $83 million.
After accumulating more than $2 billion in net losses over three years, Kodak posted net profits in four of the last five quarters.
Shifting from a shrinking film business into the highly competitive digital arena has proved costly. Kodak chopped its work force from 64,000 to 26,900, a level not reached since the 1930s Depression era. Its payroll peaked at 145,300 in 1988.
Among the 37,100 jobs that vanished in the last four years were 8,100 tied to a health-imaging unit that Kodak sold to Canadian investment firm Onex Corp. for $2.35 billion last April.
The transformation, Kodak said in a final accounting Wednesday, resulted in $3.4 billion in charges for layoffs, factory shutdowns, asset impairments and other costs.
Citigroup analyst Matthew Troy now anticipates a hiatus of six to nine months "where the dust settles a bit" before Kodak begins to trim even more jobs and slim down its manufacturing operations further.
"Nothing like the magnitude we have seen to date, but they're still faced with a very ugly, aggressively difficult uphill climb," Troy said.
Kodak has high hopes that its inkjet printers will help replace film as a high-margin earner and said it sold 520,000 home printers in 2007 — exceeding its target of a half-million unit sales. It is aiming for $1 billion in sales by 2010 in a $16 billion market dominated by Hewlett-Packard Co.
"I will be very surprised if they don't sell well over 2 million this year," said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York.
While "there were pluses and minuses in the quarter ... there are more than enough promising signs" that Kodak is finding its way in the digital arena, Yannas said. "They'll be around for a while!" he said.
Revenues from consumer digital imaging products rose 8 percent in the quarter to $1.73 billion. Graphic communications revenues rose 7 percent to $998 million, propelled by improved sales of digital plates and color printing presses.
But film products revenue dipped 17 percent to $463 million, dragged down by a 29 percent plunge in sales of rolls of film and both reloadable and one-time-use cameras. Motion-picture film sales, partly hurt by a 3-month-old writers strike in Hollywood, fell 7 percent.
In all of 2007, Kodak earned $676 million, or $2.35 a share, compared with a loss of $601 million, or $2.09 a share, in 2006. Sales fell to $10.3 billion from $10.57 billion.
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