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Kodak Loses $282M, Will Cut 2000 More Jobs
Aug 2006
ROCHESTER, N.Y., Aug. 1, 2006 -- In the wake of a wider second-quarter loss of $282 million -- its seventh quarterly loss in a row as it continues a rough transition from film to digital photography -- Eastman Kodak Co. said today it will cut an additional 2000 jobs and outsource the making of its digital cameras to a company in Singapore.

Kodak said the $282 million loss, or 98 cents a share, which widened from $155 million for the second quarter of 2005, is attributable to rising silver costs and the continued expense of its restructuring and digital transition. "We are coming into the final stages of our digital transformation," said Kodak Chairman and CEO Antonio M. Perez in a statement. "By the end of next year the majority of the restructuring costs will be behind us and Kodak will be positioned for sustained success in digital markets."

Kodak announced a massive restructuring plan in 2004 in response to faster-than-expected declines in film sales and its need to transition to digital photography. A January 2004 plan to cut 15,000 jobs worldwide became a decision in October 2005 to cut 25,000 jobs and close one-third of its facilities by mid-2007. (See "Kodak Loses $1B; Plans More Job Cuts")

By the first quarter of 2006, the company had cut more than 20,500 workers, 1630 in that quarter alone. Kodak said today it now expects to cut up to 27,000 positions, which it will complete by the end of 2007. The cuts would put its global work force at less than 50,000; at its peak in 1988, the company employed more than 145,000.

Overall, sales for the second quarter of 2006 were down nine percent from the same time last year, to a total of $3.36 billion. The losses were primarily in Kodak's Film and Photofinishing Systems Group and the Consumer Digital Imaging Group. Film and photofinishing sales were $1.153 billion, down from $1.50 billion a year ago. Consumer digital sales were down six percent, and posted an operating loss of $79 million, up from $52 million a year ago.

While overall digital revenue increased six percent over last year to $1.83 billion, traditional revenue plummeted 22 percent to $1.52 billion. Sales were up 14 percent in the Graphic Communications Group, largely a reflection of its acquisitions of KPG and Creo and associated business-integration cost reductions, Kodak said. Sales by the Health Group, which the company is still considering selling, (See "Kodak Loses $298M, May Sell Health Imaging Unit") were down six percent.

Kodak said it expected its total 2006 revenue to be down approximately 3 percent and revised down its 2006 digital revenue growth forecast from 16 to 20 percent to 10 percent.

In a separate announcement, the company said it will streamline its digital camera operations by having them manufactured and distributed by Flextronics International Ltd. Kodak said it will still manage system design and research and development and retain all of its intellectual property. It will transfer approximately 550 Kodak employees to Flextronics' facilities in Singapore.

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