Kodak Yanks Guidance on Recession Concerns

Eastman Kodak (EK) Wednesday morning said it has withdrawn its 2008 guidance for revenue growth, digital revenue growth, earnings and cash generation due to the deepening global recession and the appreciation of the U.S. dollar.

The company had previously been expecting full-year revenue to drop 3% to 5%, with digital revenue up 1% to 4%. For the second half, the company had forecast revenue down 6%-10%, with digital revenue down 1% to 5%. The old guidance was for GAAP earnings from continuing operations of $160 million to $210 million for the year, including $125 million to $150 million of restructuring charges.

Kodak now says those estimates are too high, although it did not provide new guidance.

Kodak said that subsequent to its October 30 forecast, “the company has seen the dramatic slowdown in consumer spending continue and worsen.” Tight credit markets have made it “increasingly difficult” for commercial customers to secure financing for new equipment purchases. Kodak added that because real-estate markets remain weak, the company is finding it difficult to sell surplus assets. And it says that “dramatic changes” in the value of the dollar in countries where the company sources and sells its products are reducing revenue and earnings.

Kodak also said that “where permissible by law,” it would not provide salary increases to its executives in 2009, and it will temporarily suspend its 401(k) matching program in the U.S.

Comments

[Rob Sethre ...:]

Given the narrow focus of our own company's activities, we could be accused of overemphasizing the printing and imaging aspect of every business we look at. But I would counter that much of the discussion yesterday (including the article in the WSJ) focuses excessively on the consumer products, especially the cameras. Let's put this in perspective: of the $2.4B in revenues reported from the most recent quarter, about one third, or $820M, was contributed by the Consumer Digital Imaging Group - and cameras are just part of that group. The Kodak legacy has deep roots in the consumer world, but today's reality is that the majority of their revenues, and the vast majority of their profits, are delivered by business-to-business products and activities.
Analysts need to look at their total business. If Kodak wants to view and present themselves as a consumer company, that's their problem. And yes, it is a problem, especially going forward as they have to figure out where to channel management attention and scarce resources. Cost savings will help a bit, but they really need to get over the schizophrenic phase they are currently in.

2008 Dec 11 02:34 PM