Kodak profit heads down digital road

The Eastman Kodak Company reported a fall in revenue of three per cent in the first quarter, which it attributes to focused cost reductions, along with the continued decline in traditional products by 18 per cent, despite an increase in the digital portfolio of 23 per cent. Sales of Kodak consumer film fell 29 per cent worldwide and 17 per cent in the U.S – while industry wide, consumer film declined by 20 per cent worldwide and 30% in the U.S.

The company's digital and film imaging systems sales of $1.801 billion were down nine per cent.

Graphic Communications sales were a bright spot, posting $368 million, up 30 per cent, largely reflecting the acquisition in 2004 of the remainder of the NexPress joint venture. Kodak Polychrome Graphics will provide immediate earnings contributions for the remainder of the year. Kodak's success in digital markets include increased sales of Kodak Versamark's wide-format systems.

Kodak chief executive officer Daniel A. Carp dismisses the overall loss as an inevitable consequence of the company's digital evolution. “While the first quarter's performance was disappointing, such short-term volatility is to be expected as we transform Kodak into a digital company,” he says. “We remain committed to increasing the value of the company over the long-term by delivering on our annual plans. We expect to do that in 2005 and beyond.”

Kodak president and chief operating officer Antonio M. Perez emphasises the first quarter as the smallest in terms of revenue, claiming small changes in sales tend to have an exaggerated effect on company earnings in that period

"January and February were soft for reasons that we understand, and we took actions mid-way through the quarter that resulted in much stronger performance in March. This makes us more confident of achieving our two key milestones for the year: digital revenue exceeding traditional revenue, and digital earnings growth exceeding the traditional earnings decline.

“We are successfully implementing our digital growth strategy, and we continue to redesign our cost structure to achieve our financial goals. As a result, we remain confident of achieving our full-year guidance."