Originally created 01/23/04

Kodak plans to cut up to 23 percent of work force by 2007

ROCHESTER, N.Y. -- Eastman Kodak Co., struggling to find its footing in new digital photography markets as its signature film business fades, said Thursday it will cut 12,000 to 15,000 jobs, or up to 23 percent of its global work force, over the next three years.

The announcement came as the world's biggest photography company posted a fourth-quarter profit of $19 million, or 7 cents a share, down sharply from $113 million, or 39 cents a share, a year ago.

Excluding restructuring and other one-time items, however, earnings were $199 million, or 70 cents a share. That beat the consensus forecast of 52 cents a share among analysts surveyed by Thomson First Call.

Sales rose 10 percent to $3.78 billion from $3.44 billion.

Kodak said the cuts reflect reductions in global manufacturing and selected traditional businesses as it sharpens its focus on digital photography. It will trim an estimated 2,500 to 3,500 jobs this year, it said.

"To compete in digital markets, we must have a business model that lets us move even faster," said its chief executive, Dan Carp.

The company eliminated up to 6,000 jobs in 2003, shrinking its payroll to 64,000 from a peak of 136,500 in 1983. It employed 35,500 people in the United States at the end of 2003, including 20,600 in Rochester, spokesman Jim Blamphin said.

Kodak said it would take charges of $1.3 billion to $1.7 billion through 2006, including up to $900 million in severance costs.

Its president, Antonio Perez, said the cuts are "absolutely required for Kodak to succeed in traditional markets as well as the digital markets to which our businesses are rapidly shifting."

Last week, Kodak said it will stop selling reloadable 35mm film cameras in North America and Western Europe by the end of 2004.

In September, Kodak slashed its annual dividend from $1.80 to 50 cents to help fund $3 billion in acquisitions and internal growth as it shifts away from its ailing conventional film business and into the fast-growing, highly competitive digital arena.

Filmless digital cameras, which record snapshots on computer chips, have begun outselling traditional film cameras for the first time in the United States.

Kodak spent more than $840 million last year for five companies. The biggest deal was its $486 million buyout of PracticeWorks Inc., an Atlanta-based dental-imaging and software maker. The company wants to boost its revenues to $16 billion by 2006.

In its photography division, fourth-quarter sales rose 9 percent to $2.6 billion as consumer digital camera sales leaped 87 percent. Revenues from its online photo-sharing service surged 55 percent and inkjet paper sales were up 11 percent.

Commercial imaging sales also rose 9 percent to $432 million and health imaging sales jumped 14 percent to $704 million.

U.S. sales of consumer film products, including 35mm film and single-use cameras, sank 10 percent amid heightened competition and a sharp drop in retailer orders. Kodak controls about two-thirds of the U.S. film market but profits have been hit by falling prices and a slump in sales dating back to August 2000.

Kodak expects its still unprofitable digital sector to account for half its profit and 60 percent of sales by 2006, up from 30 percent now.

For all of 2003, Kodak earned $265 million, or 92 cents a share, down from $770 million, or $2.64 in 2002. Sales rose to $13.3 billion from $12.8 billion.

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