Shareholders desert Kodak despite digital developments

The stock market reacted badly today to Kodak's declared strategy to accelerate growth based on digitally oriented technology.

Kodak stock plunged almost 18% as the market was less than enamoured at yesterday's announcement made at an investors meeting in New York City that share dividends were to be slashed by 70%.

Kodak bosses also detailed bold plans to build on its consumer, medical and professional film imaging products and services base to become a more balanced and diversified company.

The company proposed "a broader strategy for growth that will harness the power of digital technology to expand into a range of commercial businesses, resulting in a more diversified business portfolio with the potential to generate $16 billion in revenue by 2006—and $20 billion by 2010."

Kodak plans to refocus research and development on bigger, bolder ideas; accelerating investments in commercial markets and build on transactions announced earlier this year, spending some $3 billion on investments and acquisitions to achieve its 2006 revenue goal.

Kodak Chairman and Chief Executive Daniel Carp said: "We are acting with the knowledge that demand for traditional products is declining, especially in developed markets.

"Given this reality, we are moving fast - as digital markets demand - to transform our business portfolio, with an emphasis on digital commercial markets. The digital world is full of opportunity for Kodak, and we intend to lead it, as we have led innovation in the imaging industry for more than a century."

Over the next two years Kodak will "reinforce its foundation" by cutting costs and by managing the consumer film and paper businesses for cash and manufacturing share, planning to use this cash flow to strengthen its commercial, consumer and health markets.

Kodak's President Antonio Perez said: "We have the technology, the brand and the cash flow from our traditional business to help take advantage of these opportunities, and we intend to compete aggressively for market share."

But yesterday Daniel Carp admitted that Kodak was experiencing a "structural shift" in its traditional film and paper business in developed markets.

"To address this shift, we've begun a transformation that is pragmatic and bold. We are determined to win in these new digital markets, and we are creating a Kodak that is geared for success," he said.

(SP)