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Kodak Reaffirms Plan to Be Profitable Starting in 2012

February 3, 2011
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Between 2011 and 2013, the company expects revenue from these businesses to more than double, with annuity sales, from ink and consumables, growing as a percentage of revenue. In 2013, Kodak expects revenue from these businesses will approach $2.0 billion, with positive earnings.

On the consumer side, this performance will be driven by an expanding portfolio of innovative and differentiated consumer inkjet products that will be sold through an expanding global retail network. During 2010, Kodak outpaced the market in consumer inkjet printer sales by growing 45 percent, while maintaining a 30 percent price premium. During 2011, Kodak expects to grow printer unit sales by 50 percent and to again double ink gross profit dollars.

As the commercial printing industry continues to transition from traditional to digital technology, Kodak is uniquely positioned with revolutionary products and customized services that help grow customers’ businesses and Kodak’s business along with them.

Commercial inkjet growth will be driven by the company’s innovative Prosper inkjet portfolio, including the Prosper 1000 Press, Prosper 5000XL Press, and the Prosper S10 Imprinting System, all of which offer the industry’s highest-speed inkjet printing with quality, cost, and media options that rival offset printing. Kodak’s Prosper technology also provides the ability to print variable data, which offset cannot provide, and which creates new business opportunities for commercial printers.

Growth in Packaging Solutions will be fueled by revolutionary products such as the Kodak Flexcel NX System, which is designed for a wide range of package printing applications and which incorporates unique Kodak technology to deliver exceptional print quality, combined with significantly reduced production costs. Kodak doubled its installed base of Flexcel NX systems during 2010 and is poised for continued growth in 2011.

The company’s Workflow Software & Services business enables commercial printers to integrate and effectively manage all print-related business operations, and Kodak has a leading market share position. Growth in this business is being driven by strong demand for business process services, especially in emerging markets around the world.

The company also remains committed to executing its intellectual property strategy, which is focused on achieving three key goals—providing the company with design freedom to develop and introduce innovative, new products; providing Kodak with access to new markets and new partnerships; and continued income and cash generation.

From 2008 to 2010, Kodak generated $1.9 billion in revenue from its market-leading patent portfolio. Through the planning period, the company expects to generate an average of $250 million to $350 million per year in intellectual property revenue.

Kodak’s Large, Established Digital Businesses: Focused on Earnings and Cash Generation

Kodak has market-leading positions in large, established digital industries including Prepress Solutions, Digital Capture & Devices, Document Imaging, and Retail Systems Solutions. During 2011, the company is taking aggressive action to position Kodak to more effectively compete in a highly competitive pricing environment, especially in Prepress Solutions and Digital Capture & Devices, and to drive improved earnings and cash flow from its established businesses.

The company recently launched its innovative, new TRILLIAN SP Plates, which offer customers a unique combination of productivity and performance; significantly lower the total cost of ownership as compared to current-generation digitally processed plates; and position Kodak to more effectively compete in the current pricing environment.

Industry-wide demand for digital still cameras is declining, particularly in the point-and-shoot category, while other categories, including pocket video cameras, continue to grow. During 2010, Kodak grew its share of the pocket video camera market by 10 percentage points and today is the number two player. In 2011, Kodak will transform its strategy specific to Digital Capture & Devices by aggressively focusing on the most profitable segments and geographies of this market, trading top-line growth for improved earnings.

Kodak’s Document Imaging business includes a portfolio of high-speed production and workgroup document scanners. The company grew market share during 2010, and this business continues to be a solid cash generator.

Kodak is well-positioned in Retail Systems Solutions and is the market leader with more than 100,000 retail touch-points worldwide. During 2010, Kodak added more than 8,000 new customer touch-points and is enabling direct Facebook connectivity, which positions Kodak to capitalize on the growing market for photo books, greeting cards, and other premium photo output.

Kodak’s Traditional Businesses: Cash Generation and New Revenue Opportunities

The company’s Film, Photofinishing & Entertainment Group (FPEG) has maintained a strong market position in all of its key product categories, and continues to be a cash generator through the planning period. The FPEG portfolio includes Entertainment Imaging products and services, traditional photofinishing, consumer and professional film capture and services, and products for industrial material markets.

For 2011, the company is taking aggressive action to improve the operating results from these businesses. These actions include capitalizing on Kodak’s market-leading position through a continued focus on unsurpassed quality and service and the introduction of innovative, new film products; continuing to aggressively reduce costs in line with industry decline rates; and taking aggressive actions to mitigate silver pricing volatility, including the implementation of an indexed pricing model for key products and a transition to a product portfolio less dependent on silver.

In addition, Kodak is leveraging its expertise in materials and chemical science and coating technology to expand its participation in large industrial markets around the world, including printed circuit boards, industrial printing, and gelatin for pharmaceutical and other applications. As volumes decline for traditional photographic products, Kodak plans to increase sales in these new markets to mitigate the decline by repurposing existing technology and assets.

Kodak anticipates that revenue from these new businesses, which are largely immune from silver price movement, will grow on average by 11 percent annually. In 2013, revenue from these businesses will make up approximately 30 percent of total revenue from FPEG, and are cash accretive.

The 2013 Business Model

Kodak enters 2011 with sufficient resources and the financial flexibility to fully implement its strategy for profitable growth.

The company’s target business model assumes, on average, a compound annual growth rate for digital revenues of 4 percent from 2011 through 2013, and a total company compound annual revenue growth rate of less than 1 percent during that period.

Kodak’s target model for 2013 includes a total company operational gross profit margin goal of 25 percent to 26 percent. The company’s goal for operational earnings is 6 percent of revenue for the total company.

“Customers are embracing our unique value propositions in new growth markets, our traction is evident, and we are committed to improving earnings and cash performance from our large, established businesses,” said Perez. “Kodak is now a company with a broad portfolio of innovative digital products and services, leading intellectual property, and dedicated employees around the world. I am confident that we will continue to achieve market success, complete our transformation into a sustainable, profitable company, and create significant value for our shareholders.”

Source: Company press release.

 

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Most Recent Comments:
David Motheral - Posted on February 03, 2011
It looks like Kodak will do it again. Even though the industry is in transition, Kodak is leading the way to the future with products that will likely solve the digital problems of the industry. I continue to believe in the company leadership to steers the ship in the correct course. It takes time to evolve, but Kodak does it well.
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Archived Comments:
David Motheral - Posted on February 03, 2011
It looks like Kodak will do it again. Even though the industry is in transition, Kodak is leading the way to the future with products that will likely solve the digital problems of the industry. I continue to believe in the company leadership to steers the ship in the correct course. It takes time to evolve, but Kodak does it well.