Kodak to cut 12,000 to 15,000 jobs

ROCHESTER, N.Y. -- Eastman Kodak Co., which turned picture-taking into a hobby for the masses a century ago, is cutting 12,000 to 15,000 jobs, or close to a quarter of its work force, as it struggles to make the wrenching transition from film to digital photography.

The job cuts, announced Thursday, will be made in Kodak's traditional film photography businesses and will take place over the next three years, bringing the company's total employment down to World War II-era levels of around 50,000.

Kodak was slow to get into digital photography, and now, without a swift conversion, risks fading into history, analysts warn.

"We've got good momentum, particularly in our digital portfolio," which turned a profit for the first time in 2003, chief executive Dan Carp said Thursday. "We can see now into the future and have scoped out a three-year plan to ensure we stay ahead. We believe 2003 marks the bottom, and we'll build on our performance going forward."

The announcement came as Kodak posted a fourth-quarter profit of $19 million, down dramatically from $113 million a year ago.

Wall Street appeared to welcome Kodak's sharper focus on digital technology. In midday trading on the New York Stock Exchange, Kodak climbed $2.85 to $30.31. In October, the stock was down to nearly $20, an 18-year low.

"It's needed, but it radically increases the risk profile of the company. You've got a company that's going from oligopoly to a very competitive landscape," said analyst Shannon Cross of Cross Research-Soleil Securities in Short Hills, N.J.

Kodak's global workforce peaked at 136,500 in 1983. It now employs 35,500 people in the United States, including 20,600 at its fading manufacturing hub in Rochester. It eliminated up to 6,000 jobs in 2003.

Founded in 1881 by George Eastman, Kodak turned point-and-shoot photography into an overnight craze when it came out with a $1 Brownie camera in 1900. By 1927, it held a virtual monopoly of the U.S. photographic industry.

By the 1980s, Kodak still had nearly two-thirds of color-film sales worldwide. But it was slow to exploit new markets, such as point-and-shoot 35mm cameras, enabling Tokyo-based Fuji to jump from obscurity 25 years ago to challenge Kodak for No. 1.

In 2003, digital cameras began outselling traditional film cameras for the first time in the United States. Last week, Kodak said it will stop selling reloadable film cameras in North America and Western Europe this year.

During the recent fourth quarter, Kodak's consumer digital camera sales leaped 87 percent, and revenue from its online photo-sharing service surged 55 percent. But U.S. sales of consumer film products, including 35mm film and single-use cameras, sank 10 percent.

Kodak has poured more than $4 billion into digital research in the past decade, securing hundreds of patents and developing a vast array of products and services, including its Picture CD software, online photo-sharing service and easy-to-use line of digital cameras.

For all that, Kodak is still struggling to find its footing against rivals like Hewlett-Packard and Canon.

To get deeper into the game, Kodak spent about $750 million for five companies last year. Kodak also said Thursday it has offered $35 million to buy the remaining 41 percent stake in Japanese digital camera supplier Chinon Industries that it does not already own.

Kodak's digital businesses generated only $4 billion, or about 30, percent of the company's $13.3 billion in 2003 sales. It said it expects digital imaging to account for half of its profit and 60 percent of sales by 2006.

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