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Polaroid cuts staff, warns
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June 13, 2001: 2:25 p.m. ET
2Q loss to be larger than expected; 2,000 jobs, 25% of staff, face cuts
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NEW YORK (CNNfn) - Polaroid Corp. said Wednesday it is cutting about a quarter of its worldwide staff and warned that its second- quarter loss will be much wider than earlier forecasts.
The job cuts are part of the instant photography company's strategy to stem growing losses in its core instant film business and pay down debt as it shifts over to digital products. Polaroid has taken huge hits in its once popular instant film business since instant digital photography, which requires no film, became widely available.
The business has been declining 5-10 percent a year in the face of rigorous competition from Eastman Kodak (EK: down $0.95 to $47.51, Research, Estimates), Sony Corp. (SNE: up $0.84 to $73.14, Research, Estimates) and Fuji, Jonathan Rosenzweig, an analyst with Salomon Smith Barney, said.
Polaroid said it will shave 2,000 positions by the end of next year, with about half the cuts coming from U.S. operations, mostly in its home state of Massachusetts. The company will take restructuring charges of between $150 million and $175 million in the coming quarters.
"They're just trying to cut out a lot of costs, they've got to pay a lot of debt down and that requires a lot of cash," Rosenzweig said. "But it's a challenge for them because you've got a lot of big hitters in the digital business with a lot of deep pockets... I think they'll be able to cut a lot out of the infrastructure costs. The business has been declining at a 5 to 10 percent clip. The question is, can you generate enough cash from printing products to cover that loss? It's a big gamble."
Shares of Polaroid (PRD: up $0.08 to $3.61, Research, Estimates), which have been in a steady decline for the last year, barely moved in� Wednesday afternoon trading following the pre-market announcement.
The company also warned that it will post a second-quarter loss excluding special items "in the area" of the 85-cent-a-share first-quarter operating loss. Analysts surveyed by First Call expected a loss of only 7 cents a share in the current period.
After the restructuring, Polaroid will focus more on its digital photography business than on instant photography.
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"This is an extremely difficult decision, but an absolutely necessary one if Polaroid is to compete in the digital future," CEO Gary DiCamillo said. "Our infrastructure clearly is too big, and the changes in our business require a significant reduction of our cost base in line with our conservative revenue expectations for the next two to three years."
Wednesday's announcement was the second major restructuring and job cut announced this year. In February, Polaroid announced it would cut 950 jobs worldwide. 
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