Critical List

KODAK

by
Last Updated: 31 Aug 2010

These are negative times for the US photographic equipment manufacturer. Kodak lost $137m in the fourth quarter of 2008, then it announced it was sacking 4,500 people - 18% of its workforce. And the developing picture looks no brighter: sales are set to fall 12% to 18% this year, and credit agency Moody's now includes the revered 121-year-old firm among its Bottom Rung list of those most likely to go bust before the year is out.

Danger signs: The problems were there for all to see in Kodak's original slogan: 'You press the button, we do the rest.' That tag had served it well for more than a hundred years but became redundant in the do-it-yourself digital age. Forced to ditch what had been a highly profitable film manufacturing business for digital images and printing, the company laid off 30,000 people between 2004 and '08. It then lost $4.53bn in market value as investors voiced concerns over its chances in the new market. And that was before the recession hit. Digital sales have since tumbled. Chief exec Antonio Perez summed it up in photo-realist terms: 'I didn't want to be in this situation, but we are.'

Prognosis: Not too hot. Falling sales mean that the company won't regain last year's revenue level until 2012. Meanwhile, investors question whether it can maintain its dividend, which costs $135m a year. It also faces $620m in debt repayments by October 2010. Kodak is putting on a brave face: buoyed by the $2.1bn it got by selling its medical imaging business two years ago, it expects to have $1.76bn in the pot at year-end. Hence, it has objected to being included at the foot of Moody's list, and has vowed to go it alone rather than seek a sale. Its plan is to invest profits from digital cameras, motion-picture film, retailer kiosks and other high-margin products into developing consumer printers and commercial presses. But given the current consumer slowdown, that strategy seems risky. The ailing veteran may soon find the shutters going down.

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