Kodak Refocuses With Plans of Restructuring, Digital Investment

The company announces an aggressive reorganization plan to help reverse the trend of its struggling stock.
Author:
Publish date:

Hobbled by slowing sales,

Eastman Kodak

(EK)

, announced a big corporate restructuring Monday, as the photography company vowed to streamline its businesses, improve customer service and make aggressive investments in digital technologies in a bid to reverse its fortunes.

Kodak's new cost-cutting plan calls for the consolidation of its seven business units into two groups, one for consumer business and the other concentrating on the commercial side.

Daniel Carp, Kodak's president and chief executive, will lead the consumer group, which includes the consumer imaging business, the company's largest unit. Martin Coyne, currently president of Kodak's health imaging unit, will become president of the commercial group, reporting to Carp.

"By combining the current business units into two groups, we can take advantage of the strengths of each to serve customers more efficiently, create new products more quickly and extract administrative cost savings," Carp said in a statement. The company did not mention in the statement whether the move would lead to any layoffs.

The restructuring was announced Monday after the company's ailing stock rose $1.56, or 4.2%, to close at $39.06 on the

New York Stock Exchange

. Yet the news comes on the heels of some earnings difficulties at Rochester, N.Y.-based Kodak, whose stock is trading well below its 52-week high of $71.19, reached nearly a year ago.

In September, the company warned of much lower-than-anticipated third-quarter profits, blaming lackluster film sales, weak foreign currencies and high raw-material costs. In response to the warning, Kodak's shares fell a sharp 25%.

Last week, Kodak reported that its third-quarter profits, excluding charges, fell to $430 million, or $1.40 a share, from $466 million, or $1.45 a share, a year earlier. The results, though, exceeded analysts' lowered expectation of $1.37 a share, according to

First Call/Thomson Financial

.

But making matters worse, the photography giant also said it would miss its earnings profit for the fourth quarter as well as a result of weaker film sales. Slowing sales in turn have prompted retailers to scale back their film inventories.

Kodak is hoping that the reorganization announced Monday will enable it to turn itself around.

The company's new consumer business group will include its digital and applied imaging business as well as consumer imaging. The commercial business group will include Kodak Professional, document imaging, entertainment imaging and global customer service and support, as well as the health imaging business.

Kodak also said Monday that it intends to focus more heavily on new business activities aimed at spurring sales from Kodak's research labs and venture capital investments. James Stoffel, Kodak's chief technical officer, and Ted Lewis, senior vice president of Kodak's digital business development unit, will jointly oversee the new business efforts.

Earlier this month, Kodak said it had taken a stake of digital photography Web site

PhotoAlley.com

and was joining electronics and office supply retailer

Circuit City

(CC) - Get Report

to provide co-branded photo album software and photo-finishing services.