Kodak Reports Mixed Quarterly Results

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August 1, 2006 - Today, Eastman Kodak Co, the world’s largest film manufacturer, released its second quarter results, with a net loss of $282 million this quarter.

The Kodak reports come as a mixed bag of positive and negative results, with general net losses and high profits in digital revenue. The company suffered a $282 million net loss, compared to a loss of $155 million in 2005, due to the high costs of raw materials and company reconstruction.

In turn, Kodak also reported digital revenue increases in what the company calls an "achievement of digital profitability two quarters ahead of last year’s pace," in today’s release. Digital revenue totaled $1.83 billion, up 6 percent from last year’s $1.72 billion.

While the company grew in overall digital revenue from such items as health care imaging products, consumer digital products, including digital cameras, dropped by 6 percent. Kodak attributes the sliding digital product sales to decreased demands and the "negative price of consumer digital production," said Kodak’s release.

Kodak’s major competitor Fujifilm also reported a significant net loss of nearly 50 percent last week. Fuji, the second largest manufacturer of film, also suffered from high prices of silver and company reform costs.

"Analysts have found it difficult to measure Kodak's overall health due to constant restructuring," according to today’s Reuters news article.

Since its reconstruction announcement in January 2004, Kodak created a new business model to deemphasize its traditional source of revenue, film, and manufacture digital products instead. The overhaul of film production has led Kodak to cut 25,000 jobs, according to Reuters.

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The company states that it is nearing its end of the strategic spending. "We are coming into the final stages of our digital transformation," said Kodak CEO Antonio Perez in today’s news release. "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," he said.

Kodak will no longer manufacture digital cameras, according to a separate Kodak news release today. Although the company will maintain design rights to the cameras, Kodak will partner with Flextronics International Ltd. to manufacture and distribute the digital cameras. Kodak will transfer 550 of its employees to Flextronics.

With these financial changes, Kodak predicts the company will draw in a digital revenue growth of 10 percent in the 2006 fiscal year with a total revenue deficit of 3 percent. Kodak revised its yearly forecasts earlier this year.

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