Kodak Medical Unit May Be Sold
Eastman Kodak Co., undergoing a rough transition to digital photography, said Thursday that it was considering the sale of its pioneering health-imaging business after reporting a $298-million loss in the first quarter -- its sixth straight quarterly loss.
Created a year after the discovery of X-ray film in 1895, the unit accounts for nearly one-fifth of Kodak’s overall sales, but its operating profit plunged 21% last year as margins tightened. A sale would wipe out most or all of Kodak’s $2.6 billion in debt, analysts said.
“To some extent it is a survival tactic,” said Shannon Cross of Cross Research in Short Hills, N.J., who thinks the business might fetch $1.5 billion to $2 billion. “Nothing’s imminent, but they need to improve their capital structure.”
“It’s a fast way of restoring their credit rating,” said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York who thinks the unit “can bring at least $4 billion.”
Largely because of restructuring costs, Kodak lost the equivalent of $1.04 a share in the January-March quarter, compared with a loss of $146 million, or 51 cents a share, a year earlier. Sales rose 2% to $2.89 billion.
Excluding one-time items, Kodak lost $99 million, or 34 cents a share. The consensus forecast was profit of 5 cents among analysts surveyed by Thomson Financial.
Shares of Kodak fell 59 cents Thursday to $26.76.
While stung again by the slide in film sales, Kodak found some solace in its steady drive into the digital era. Its overall digital sales in the quarter surged 29% to $1.6 billion, while revenue from film, paper and other traditional, chemical-based businesses slumped 20% to $1.26 billion.
Last summer, the 126-year-old company disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004.
Kodak is looking at “strategic alternatives” for its Health Group that include a partnership, an outright sale and other options.
“We will explore them all and selling will be one of them -- but it’s not the only one,” Chief Executive Antonio Perez said.
