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Kodak to cut 10,000 jobs
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November 11, 1997: 3:26 p.m. ET
Film manufacturer looks to reduce cost structure by at least $1 billion
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NEW YORK (CNNfn) - In its latest restructuring move, Eastman Kodak Co. said Tuesday it will cut 10,000 jobs, or about 10 percent of its work force, as part of a plan to revive the company.
The film manufacturer also said it would take a $1 billion pre-tax restructuring charge, equal to about $2 per share on this year's results. Half of that figure is directly related to the job-cutting measures.
The moves are part of an overall plan to cut about $1 billion in costs over the next two years. Kodak has struggled recently, seeing its market share decline as international competitors such as Fuji Photo Film have grabbed a larger share of the film business.
At a New York press conference Tuesday Kodak CEO George Fisher underlined the company's woes, saying its digital operations alone would lose $400 million this year.
"I want to make clear that each Kodak business contains digital investments, so all of our digital losses -- except for Digital & Applied Imaging -- are imbedded in currently profitable business units," he added.
Digital cameras capture images electronically rather than on a physical piece of film and represent the new frontier for film companies but Kodak's unit has been hobbled by low sales.
The retreat of Kodak marks a sharp turnaround for a company that, during the postwar period, enjoyed a virtual monopoly on film sales.
However, that success may be to blame for the company's current problems. Analysts feel that the lack of competition made the company bloated and unable to cope when firms like Fuji emerged with lower prices.
To remedy the situation, Fisher said Kodak would try to beat Fuji at its own game by lowering its own film prices.
Despite its problems, Fisher remained optimistic about the future. "Our growth objective remains unchanged -- we want to produce an average annual increase in earnings per share of at least 10 percent over time," he said.
He also stressed Kodak would take a back-to-basics approach. "Our business is pictures. It doesn't matter what form they're in -- analog or digital. Kodak is the brand synonymous with pictures."
Fisher predicted that sales in emerging markets would help brighten Kodak's picture.
What remains to be seen is how Kodak can accomplish that when it has already been battered by a stronger dollar, which makes its products more costly overseas, and many emerging markets have shown signs of weakness.
Jeffrey Pittsburg, partner at Goldis-Pittsburg Institutional Services, said that Kodak's stock (EK) will be a good buy, but not until the middle of next year after weathers a downturn due to the changes.
Pittsburg was heartened by Kodak's statements at the meeting that the company would focus more on its core business.
"They're going back to what Kodak knows, where you walk into the shop and you deliver your film," he said. "I think that's very important."
Restructurings are nothing new to Kodak. Since 1993, when George Fisher became CEO, Kodak has launched a series of plans to rescue its sagging results. Those changes included an announcement of the cutting of more than 200 management positions in September.
It is those less-than-effective attempts that made some analysts skeptical that another restructuring will solve some of Kodak's fundamental problems.
"They're unfortunately stuck with a cost structure that is still, even after some tremendous restructurings, probably grotesquely too high," said Ernest Widmann, president of Widmann, Siff & Co, predicting future restructuring plans. "I doubt this is the last one."
Kodak would not say what the time frame was for the job cuts, but indicated they would come from all areas of operations.
"We will notify people affected by these actions worldwide as quickly as we can. Timing must be consistent with operational needs," said Daniel A. Carp, Kodak's president.
The work force will not be the only area to be trimmed. General and administrative expenses will be cut by at least 10 percent, and research and development spending will be reduced by between $100 million and $150 million.
Outsourcing work to other firms and other types of partnership ventures are also being considered, Kodak said.
-- by staff writer Randy Schultz
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Eastman Kodak
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