Kodak Expected to Cut at Least 10,000 Jobs

Eastman Kodak Co. is expected to take $1 billion in charges this year to cut at least 10,000 jobs as the photography company struggles with stiffer competition, sluggish sales and declining profit.

The firings will be just part of Chairman George Fisher’s response to the worst crisis in his four-year tenure, Kodak investors and stock analysts said Monday. He also will hire other companies to make more of Kodak’s equipment, they said, to help cut costs.

The moves will be the centerpiece of an effort to compete with more efficient rivals, notably Fuji Photo Film Co., analysts and investors said. Unless Kodak can produce its film and equipment at less cost, it will continue losing market share to Fuji and have a hard time affording the investments needed to achieve dominance in the fledgling digital-imaging industry, they said.

“They have to be the lowest-cost provider,” said John Criss, a money manager at European Investors Inc. in New York. “They have to drive down costs--whatever it takes.”

Analysts said Kodak might cut as many as 13,000 jobs, or almost 14% of its 95,000 employees. That alone could result in a charge of about $900 million.

“There will be across-the-board cuts, and they’ll be heavily weighted for what passes as middle management,” said Merrill Lynch analyst Robert Curran.

Charles Smith, a spokesman at Rochester, N.Y.-based Kodak, declined to comment on the analysts’ expectations.

Last week, Kodak told analysts it would review as many as 200 businesses with an eye toward shedding money-losing units and cutting jobs as its profit comes under pressure. Kodak said third-quarter earnings could fall by as much as half. It didn’t say it plans to take any charges, however.

Yet everyone thinks charges are coming, said Merrill’s Curran. A $1-billion charge would reduce earnings by a bit more than $3 a share, based on about 326 million shares outstanding. Analysts expect Kodak to earn about $3.50 a share this year, excluding any charges.

This quarter’s profit drop will be the third in a row. For the full year, the expected profit will be less than last year’s $3.82 a share.

The problems plaguing Kodak run far deeper than the disclosure last week that earnings will be crimped by Fuji’s price cuts on consumer film and reduced revenue from a rising dollar.

Fisher still needs to cut a bloated work force that’s keeping Kodak from competing against an aggressive and leaner rival. Kodak’s revenue per employee is less than half of Fuji’s, said Ulysses Yannas, an analyst at Mercer, Bokert, Buckman & Reid.

Kodak also may take a charge as large as $350 million to write off the value of some of its own plants and equipment as it shifts some manufacturing to outsiders, Yannas said.

Fuji’s cost advantage allows it to sell its goods more cheaply than Kodak, steal market share and more easily sustain investments in digital technology, said European’s Criss, whose company owns 33,000 Kodak shares.

“When you drive costs down and bring prices down without hurting margins, you drive volume up,” he said.

Kodak said last week that it has lost 2 to 3 percentage points of the U.S. color-negative film market in the last year. In mid-July, it had put the loss at 1 to 2 points.