Kodak posts wider 2Q loss on lower revenue

AP News
Posted: Jul 26, 2011 6:24 PM
Kodak posts wider 2Q loss on lower revenue

While surging sales of inkjet printers are helping Eastman Kodak Co., the photography pioneer said Tuesday its second-quarter loss widened to $179 million on slumping revenue from digital cameras and film.

Aiming to cross back to profitability in 2012 after four years of losses, Kodak projected a bigger loss for all of 2011 than previously forecast.

Its fourth quarterly loss in a row amounted to 67 cents a share in the April-to-June period. It lost $168 million, or 63 cents per share, in last year's second quarter.

Revenue fell 5 percent to $1.49 billion, with digital-imaging sales little changed at $1.09 billion but film group revenue down 14 percent at $396 million.

The results missed Wall Street expectations. Excluding items, Kodak said it lost 62 cents per share. Analysts surveyed by FactSet expected, on average, an adjusted loss of 59 cents on revenue of $1.56 billion.

Its shares rose 6 cents to close at $2.39 Tuesday.

Sales of commercial and consumer inkjet printers, workflow software and packaging rose by a combined 22 percent in the quarter, led by 48 percent growth in home printers and ink.

The four businesses remain a bright spot in the 131-year-old company's long and painful drive to recast itself into a reliably profitable player in the turbulent digital-imaging arena. Kodak is hoping they will more than double in size by 2013, accounting for 25 percent _ or nearly $2 billion _ of all sales.

However, Kodak now expects 2011 segment losses will reach $100 million to $300 million, compared with a previous projection ranging from breakeven to a $200 million loss. It also projects a steeper $200 million to $400 million loss from continuing operations, versus an earlier forecast of such losses ranging from $100 million to $300 million.

Its revenue forecast of $6.4 billion to $6.7 billion remains unchanged.

Since 2004, Kodak has reported only one full year profit _ in 2007. It has trimmed its work force to 18,800 from 70,000 in 2002.

It is banking on replacing the huge profits it once made from film with revenue from ink sales. More than 3 million people already own Kodak home inkjet printers, and analysts estimate 5.3 million units will be installed by year-end.

Kodak expects to turn its first profit from home inkjet printers late this year, and its commercial line of printers is targeted to turn profitable in 2012.

Investors are focusing intensely on Kodak's strategy of brokering licenses or settlements from its trove of 11,000 patents. It didn't garner intellectual-property payments in the quarter but still expects to haul in $250 million to $350 million in revenue this year.

Kodak has been burning through cash as it invests in printer businesses. It had $957 million in cash at the end of June. It now expects to have a year-end cash balance of $1.6 billion to $1.7 billion, down from a previous projection of $1.7 billion to $1.8 billion.

Mining its rich patent portfolio for repeated cash infusions has become an indispensable tactic. Since 2008, Kodak has generated almost $2 billion in licensing fees and royalties. It revealed last week it is exploring the sale of its 1,100 digital-imaging patents.

"We've seen an amazing appetite in the market for these kinds of assets _ this is the only reason why we're doing this," CEO Antonio Perez said in a conference call with analysts.

Kodak hopes to generate $300 million to $400 million this year from the sale of non-strategic assets. Some investors appear to be growing more hopeful that Kodak is "now willing to make really hard choices" and even sell businesses "above and beyond what they've already talked about," said analyst Shannon Cross of Cross Research in Livingston, N.J.

Kodak is suing iPhone maker Apple Inc. and BlackBerry maker Research In Motion Ltd., saying their smartphone camera features infringe on image-preview technology it patented in 2001.

The case before the U.S. International Trade Commission, a trade-dispute forum that can block imports of patent-infringing products, has been extended until at least Aug. 30. Kodak is trying to negotiate a licensing deal it estimates could be worth up to $1 billion.

Kodak's sales of low-end cameras have been hurt by stiff competition from smartphones and video cameras and by its recent shift to pricier models. But operating losses in its consumer digital imaging division narrowed to $92 million from $123 million a year earlier on higher camera and printer ink profits. The segment's sales slid 8 percent to $404 million.

Graphic communications sales rose 4 percent to $685 million. But investments in commercial inkjet printing and rising raw material costs widened operating losses to $45 million from $17 million a year earlier.