Kodak Digital Profit Growth Behind Targets

Its digital growth view is tempered by economic slowdown, weakness in health segment.
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Eastman Kodak

(EK)

dimmed the outlook for its digital-imaging profit this year, saying it might not hit its targets because of the potential economic slowdown and weakness in its health segment.

The company, in the midst of an attempted transformation from traditional photography products to digital imaging, said digital growth is expected to be "somewhat behind" its target of $275 million to $325 million set earlier this year. Still, the company projects digital earnings from operations will rise by more than 300% for the year.

Kodak said the tempered view stems from lower-than-expected earnings growth in its health group, which includes items such as health-care information systems and digital radiography systems. The company also pointed to the possibility of slower U.S. economic growth for the rest of the year.

Despite the lower profit outlook, Kodak expects revenue growth from its digital operations will top the growth rate of 36% it projected earlier in the year. The company expects 2005 will mark the first year in Kodak's history that digital revenue will exceed traditional product revenue.

Kodak said it is continuing to cut manufacturing capacity in its consumer traditional operations in order to reach sustained profitability. The plan calls for capacity utilization to increase to roughly 90% by late 2007, from an average in 2004 of 65%.

The company also is continuing its planned job cuts in the traditional operations and among administrative employees. Kodak has said it plans to cut up to 25,000 jobs as part of its transformation process.

Kodak shares recently changed hands at $24.99, down 2 cents.