Kodak to Sell Much of Copier Unit to Danka
Eastman Kodak Co. agreed Monday to sell its money-losing copier unit’s sales and service operations to Danka Business Systems for $684 million, ending a nine-month attempt to unload the whole business.
Kodak will report a loss of $250 million on the transaction and take a charge when the purchase is complete, probably by year’s end.
Although investors are happy that Kodak is able to sell part of the unit, the outcome is a disappointment for Chairman George Fisher, who wanted to keep the business intact and use it to round out Kodak’s push into digital photography. Kodak will continue to make copiers for the London-based office equipment company under the Kodak name.
“It’s disappointing that Kodak didn’t get out of manufacturing and that they have to take a charge, but Wall Street can breathe a sigh of relief,” said B. Alex Henderson, an analyst at Prudential Securities Research in New York.
Kodak shares fell 50 cents to $71.75. Danka American depositary receipts surged $6.625 to $36.50 in heavy trading.
The sale largely frees Kodak from a business that has been a constant drag on earnings, and it gives Danka access to Kodak’s high-volume copiers and Fortune 500 accounts. Most of Danka’s customers are regional companies that use middle- and lower-volume copiers and printers.
“This is a very competitive business, and I’d rather see Kodak recognize that and take a loss,” said Pete Hathaway, senior vice president at GE Investments Corp., which holds about 1.4 million Kodak shares.
Under the agreement, Kodak will continue its own research and feed any new product developments to Danka. Both Kodak and Danka will fund the research. The photo company will also be able to sell supplies such as toner to Danka and other businesses.
Kodak will keep the rights to any digital photography technology it invents--an essential negotiating point for Kodak. The digital technology is key to Fisher’s plan to push Kodak into the business of merging computers and photography. Part of that business includes printing photos from a computer on a digital copier-printer.
Kodak’s copier unit generated about $2 billion in sales in 1995. It lost about $100 million, according to analysts. Kodak doesn’t break out copier-unit profits.
The unit remaining in Kodak’s hands will have revenue of about $600 million this year. It is currently unprofitable, but Kodak expects the unit to begin making money by the end of 1997.
“The manufacturing has always been a challenge,” said Carl Kohrt, assistant chief operating officer at Kodak. “We intend to put a spotlight on that and prove we can make it a stand-alone profitable business.”
Wall Street has pressured Kodak for years to shed the business, which has suffered from a dearth of new products, high overhead and price cuts. Kodak said in January that it was looking into selling the unit or forming a joint venture.
