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Eastman Kodak Co. said Wednesday it is bracing for a 12 percent to 18 percent slump in sales this year and a wider-than-expected loss because of the severity of the economic downturn.
The photography products maker will hone investment in promising digital printing businesses _ consumer inkjet printers and high-speed commercial presses and software _ while leaning heavily on cash generated by digital cameras, motion-picture film, retailer kiosks and other high-margin products.
"This is just a little detour that we have to take," Chief Executive Antonio Perez said in an interview ahead of Kodak's annual meeting of analysts and institutional investors in New York on Wednesday. "We have the stamina to go through this.
" Kodak forecast a loss of $200 million to $400 million from continuing operations in 2009. Analysts surveyed by Thomson Reuters expected, on average, a loss of $35.9 million. Excluding restructuring costs, Kodak expects its net profit will reach $475 million to $675 million in 2009. "We are assuming that 2009 is going to be as bad as the second half of 2008," Perez said. "When we put all of our digital markets together, we expect a contraction of about 10 percent." The contraction will likely worsen in the first half of 2010, followed by a return in 2011 "to the margins and the growth levels that we had in 2007," Perez said.
The recession has already hit Kodak hard. Its stock skidded below $5 a share _ its lowest level in more than 40 years _ after it posted a $137 million, fourth-quarter loss last week on plunging sales of both digital and film-based photography products. Shares fell 3 cent to $4.47 in morning trading. It is cutting up to 3,500 to 4,500 jobs this year, or 14 percent to 18 percent of its work force. That could reduce its payroll to a 1930s-era low of 19,900 from a peak at 145,300 in 1988. Through 2012, Kodak anticipates revenue will rise 4 percent a year on average, driven by an 8 percent to 10 percent rise in digital sales.
A year ago, it forecast a 5 percent annual growth rate through 2011. To help trim costs, Kodak will seek alliances with other companies to develop promising technologies such as image sensors, organic light-emitting diodes and electro-photographic printing. It also plans to complete its exit from photofinishing services in the first half of this year. Until the fourth quarter of 2008, Kodak's digital businesses were picking up speed, posting six straight quarters of growth.
In addition, it has amassed $2.1 billion in cash versus $1.3 billion in debt. While the onset of the global recession was painful, Perez is certain it would have been catastrophic if it occurred in the midst of Kodak's four-year overhaul between 2004 and 2007. "If this happened two years ago, we would have been dead," he said, laughing. "If it was up to me, I wish this would have happened in let's say another two years. That would have been a lot of easier." Converting the bulk of its business from high-margin film to more competitive digital technology cost the picture-taking pioneer $3.4 billion from 2004 through 2007.
It chopped its global work force from 64,000 to 24,400 at the end of 2008, with about two-thirds of its 12,800 U.S. employees based in Rochester. Sales of a two-year-old line of home printers that produce high-quality photos using inexpensive ink cartridges more than doubled to 730,000 in 2008 but fell short of a target of 1 million to 1.5 million units. Kodak expects unit sales to double once more this year. It also has high hopes for Stream, a continuous-feed inkjet color press being brought to market early next year that can produce more than 2,500 pages a minute and could transform commercial printing, where traditional offset still reigns.
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