I'm about to buy EK as part of my annual Dogs of Dow switch and I'm looking for a good entry point. How does todays news affect the short/intermediate term trading price. TIA, dper.
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Wednesday November 5 6:19 PM EST
Kodak Set to Announce 14,000 Possible Job Cuts
By Jeffrey Benkoe
NEW YORK (Reuters) - Eastman Kodak Co., the embattled photography and imaging giant, will unveil a long-awaited restructuring Tuesday that may cut 14,000 jobs, slash costs by $1 billion, consolidate several businesses and expand joint ventures, analysts said.
"It's going to have to be a rather large restructuring in order to have sufficient impact and give them the flexibility to compete with firms like Fuji," Robert Curran, an analyst at Merrill Lynch, said.
Kodak is also expected to slash film prices to recapture U.S. market share it lost to competitors like such as Photo Film Co. Ltd. But Kodak is not likely to offer many details on price cuts next week, since that would complicate negotiations with big retail customers.
Analysts are looking for Kodak to slash labor costs significantly. By some calculations, a minimum of 4,000 to 5,000 layoffs are expected, at a cost of $300 million. Others see bigger cuts.
"Kodak has to cut employment levels to 80,000" from the current level of about 94,000, said Ulysses Yannas, an analyst at Mercer Bokert, Buckman and Reid.
Yannas said, however, that an estimate of $1 billion in total writeoffs that was circulating around Wall Street was too high. He expected a total closer to $900 million, with two-thirds to pay for layoffs.
Analysts said they expect Kodak senior managers to set a costs goal of about 20 percent of sales, down from the current 28 percent.
"As the business moves towards digital, they've got to take out a significant percentage of SG&A (selling, general and administrative costs)," said Michael Ellmann at Schroder & Co.
Kodak has said it will cut the SG&A workforce by 10 percent, but analysts expect that to be the tip of the iceberg. Ellmann said that, compared with a company like Fuji, Kodak has a bloated staff, primarily because it is a traditional, vertically-integrated company.
Some analysts expect Kodak to get out of businesses like microfilm and microfiche.
"I suspect they will close down those businesses," said one analyst who declined to be identified. "I can't say for sure that they're money-losing businesses, but from what they've alluded to in the past, they're not good businesses."
More joint-venture deals are also expected. Kodak last month signed a deal for a joint venture with Dainippon Ink & Chemicals Inc.'s Sun Chemical to supply film, paper and other products to the graphic arts industry.
Assembly operations in some of its photo equipment units -- including the assembly of disposable cameras -- are likely to be shifted from U.S. plants to sites with lower labor costs, such as Mexico, analysts said.
Other manufacturing -- such as photo-finishing -- may be turned over to outside contractors, analysts said, with the aim of reducing manufacturing costs by 10 percent.
Ellmann said Kodak may stop manufacturing photographic paper, sell its paper mill in Rochester, N.Y., and buy from outside vendors.
Other analysts were pessimistic about entire divisions.
"The whole commercial business is a money-losing business," an analyst said. "It's hemorrhaging a lot of money."
The analyst argued that Kodak "is not a manufacturing company. They're a razor blade company ... They're not able to compete in markets where there are short product cycles."
Looking at its future, the analyst said: "Essentially, the business will be dictated by the little yellow (film) boxes."
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Analysts Say Kodak May Cut 14,000 Jobs - Wed Nov 5 4:20 pm
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