Takeover Rumors Fly : Polaroid to Trim Staff, Reorganize to Bolster Profits

Polaroid said Tuesday that it will cut its staff, reorganize operations and buy back $300 million worth of its stock, amid a new swirl of rumors that a raider is stalking the maker of instant film and cameras.

Polaroid, suffering from slow sales of its instant cameras and film, said its work force cuts will be made in a voluntary program expected to reduce its payroll by 500 to 800 employees, or up to 8% of the domestic labor force. In a prepared release, Chief Executive I. MacAllister Booth said the reorganization would “refocus our energies . . . by eliminating various business and research areas that simply do not fit in our long-term strategy.”

Polaroid said the reorganization program was adopted by its board “to boost profits and increase shareholder value.” It said it would establish a $75-million reserve to cover the costs of the reorganization but predicted that the changes would reduce costs by $70 million a year.

As part of the program, the company will also place a block of newly issued stock, equivalent to 14% of outstanding shares, in an employee stock ownership plan. Analysts said the creation of this plan would make a takeover far more difficult.

Also announced were plans to enter the conventional film business, a move that has been hinted for some time.

A Wall Street darling of the 1960s, the Cambridge, Mass., manufacturer has been struggling with uneven success in recent years to reverse what some analysts see as a long-term decline in the attraction of its instant photographic products. Camera sales were up sharply last year after Polaroid’s introduction of its Spectra brand camera but fell off against this year, shrinking this year’s first-quarter profit to 50% of last year’s levels.

Meanwhile, Wall Street has buzzed with talk that one of several would-be acquirers has been accumulating the stock. Mentioned again Tuesday were Shamrock Holdings, the company controlled by entertainment industry figure Roy E. Disney; the Bass family of Ft. Worth, and John Kluge, the tycoon who built and then sold the Metromedia broadcast empire.

‘Major Problems’

Those and other potential acquirers--none of whom has commented on the speculation--are believed to have been drawn to Polaroid in part because of the preliminary judgment it has won in a patent-infringement lawsuit against Kodak. Many on Wall Street believe that the suit could bring Polaroid a judgment of $1 billion or more.

Polaroid’s stock closed Tuesday at $31.125, up $1.50, on heavy trading volume of 1.7 million shares. Polaroid’s stock has recently had an average daily volume of 530,000 shares.

Charles Ryan, analyst with the Merrill Lynch brokerage house in New York, said the reorganization is “recognition that there has been a major problem in the company’s film division for nine of the past 10 years.”

Ryan said instant camera sales have been declining since the late 1970s because of their relatively high price, competition from 35-millimeter and other cameras and the opening of one-hour film development stores. Polaroid’s instant camera sales have fallen from about 7.3 million a year in the early 1980s to about 3.5 million cameras today, Ryan said.

Polaroid derives slightly less than 60% of its revenue from instant cameras and film, and the remainder from its medical and industrial imaging businesses.

Polaroid spokesman Sam Yanes said the company expects the work force reduction program to be completed by year-end. He predicted that profits will show the results of the restructuring next year.

While Polaroid did not identify which of its research efforts it plans to eliminate, Yanes noted that the company has several efforts under way in areas not directly related to Polaroid’s core businesses. Among them are research in fiber optics, photovoltaics and high-density magnetic products.

Questions Remain

Yanes denied that the restructuring was a response to the fears of a takeover, saying that the company had been “laying plans to adjust our strategic focus for a long time.” Polaroid still believes that it can increase sales of instant photographic products by continuing to introduce new and better cameras and films, he said.

Company officials declined to say whether Polaroid intends to break into the conventional film business by manufacturing its own film, or by simply distributing film manufactured by another firm. Polaroid has been distributing another manufacturer’s film in Spain and Portugal for some time, analysts noted.

B. Alex Henderson, analyst with Prudential-Bache Securities, said Polaroid’s name and strong distribution through such national retailers as K mart may give it an important edge as it tries to break into the new market. He noted that profits on such film sales can reach as high as 60% of sales.