Kodak

[P3D Eric Goldstein <egoldste@xxxxxx>]

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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