NEW YORK – Eastman Kodak Co. (EK) Wednesday posted its third quarterly net loss in a row and said it would cut up to 10,000 more jobs as it struggles to cope with the collapsing traditional film market.
Even after excluding one-time items, Kodak posted a profit that was sharply below Wall Street estimates as its film sales fell faster than expected, and its shares slid 9.5 percent.
"Clearly, operations are on a downward slide at Kodak," said Tim Ghriskey, chief investment officer at Solaris Asset Management, which has $800 million in assets under management.
"In traditional film, not only is the market in decline, but they face very aggressive price competition. Also, the digital camera (market) is not growing like it had been," Ghriskey added.
The world's top maker of photographic film posted a second-quarter net loss of $146 million, or 51 cents a share, compared with a net profit of $136 million, or 46 cents a share, a year earlier.
Revenue rose to $3.69 billion from $3.46 billion last year, although sales of traditional film-based products and services fell 15 percent to $1.843 billion.
Excluding costs related to restructuring and other one-time items, Rochester, N.Y.-based Kodak had a profit of 53 cents a share.
On that basis, analysts had forecast a profit of 79 cents a share, on revenue of $3.65 billion.
Shares of Kodak fell $2.34 to $26.40 on the New York Stock Exchange (search).
Kodak Chief Executive Antonio Perez (search), who assumed the position in June, said sales of traditional film and related services are declining faster than expected, led by emerging markets. U.S. consumer film industry volumes sold at stores fell by about 25 percent in the the quarter compared with the prior year.
Sales of rolls of film and processing services remain important because Kodak is using the cash they generate to fund its switch to digital products such as cameras, docks and commercial printing.
"Our disappointing start in the first half of this year makes it clear that I need to make some changes, and make them now," Perez said in a statement.
Kodak, which in January 2004 had said it would cut its worldwide work force by up to 15,000 jobs, said it now plans to cut the work force by a total of 22,500 to 25,000 jobs.
Kodak at the end of 2004 had a worldwide work force of 54,800, down from 64,000 at the end of 2003.
The increased cuts will include about 7,000 manufacturing jobs and will result in total charges of $2.7 billion to $3 billion, up from expected charges of $1.3 billion to $1.7 billion announced originally, the company said.
Kodak said it also plans to trim its traditional manufacturing assets, including plants, factories and other equipment, to about $1 billion, compared with $2.9 billion in January 2004. The company, which has been closing factories since its restructuring began, did not detail if more plants would be closed.
Perez said the new cuts would save the company about $800 million on an annual basis.
At the same time, Kodak says its digital efforts are succeeding. Second-quarter digital sales rose 43 percent to $1.84 billion, and June digital revenue exceeded that of traditional film on a monthly basis for the first time.
Kodak's bonds weakened on the earnings, and the cost of protecting the company's debt against default rose.
Kodak bonds paying 7.25 percent interest, due 2013, fell 1.375 cent on the dollar to 103.625 cents on the dollar. The cost of protecting Kodak's debt against default for five years rose 0.15 percentage point to 190 basis point, or $190,000 a year for every $10 million of principal protected.
Although the stock had bounced back in recent weeks, it is still down about 10 percent this year, and is underperforming the Standard and Poor's 500 index by about 13 percent.