Kodak's digital investment strategy puts bite on shareholders
Kodak's digital investment strategy puts bite on shareholders
Eastman Kodak has presented a broad strategy for growth to its investors that in order to succeed will see shareholders have to swallow a major drop in dividends, as the company looks to divert earnings into an overhaul to protect its long-term viability.
The proposed strategy – which will see Kodak move into digital markets from its traditional film imaging products business – will cost the company up to US$3 billion (AUD$4.4 billion) in investments and acquisitions if it hopes to achieve its target of US$16 billion in revenue by 2006, according to Kodak executives.
In order to generate funds, shareholders have been asked to accept a drop in annual dividend from US$1.80 a share to just 50 cents a share.
Kodak Chairman and Chief Executive, Daniel A. Carp, said the reorganisation was necessary in order to prevent Kodak from being left behind in a changing market.
"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."
In attempting to soften the immediate blow for its shareholders, Kodak turned the emphasis onto the long-term benefits of the realignment. It said that if it achieved its target of $16 billion in sales by 2006, and with the absence of special charges that cannot be estimated currently, its earnings per share potentially could exceed $3.00 that year.
Kodak will centre its growth efforts on three broad markets: commercial, consumer and health, and have installed executives with extensive digital experience in charge of each division of the company.
Recently-installed President of Kodak, Antonio Perez, said of the company's move: "I am committed to ensuring that we execute on our growth strategy. 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."
"Today, we are experiencing a structural shift in our traditional film and paper business in developed markets," said Carp. "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."
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