Kodak in $1-billion buyback
June
2008 In a move not unlike luxury carmaker Daimler’s 6-billion share
buyback announced last week, 128-year old photography pioneer Eastman
Kodak has announced a similar $1 billion move, driving its share price
up the maximum in the last two decades.The buyback is expected to be
financed by a $581-million tax refund and cash surplus accumulated by
selling off its medical imaging business last year to Canadian
investment firm Onex Corp for $2.35 billion.The repurchase programme is
authorised through the end of 2009.Under the terms of the repurchase
programme, the company may repurchase shares in open market purchases
or through privately negotiated transactions.The move underlined
Kodak’s faith in its makeover as a digital technology company, analysts
said, and appeared timed to take advantage of a steep slide in its
stock price to 30-year lows.
Kodak surged $1.69, or 14 per cent,
to $14.03 at 4 p.m. in New York Stock Exchange composite trading, the
biggest percentage gain since 20 October 1987, the day after the Black
Monday stock market crash. The stock has lost half its value in the
past five years on declining demand for traditional film products.The
repurchase accounts for 28 per cent of 288.2 million outstanding shares
and is the first under CEO Antonio Perez, who has worked to return
Kodak to profitability through sales of digital cameras and inkjet
printers. The company may have faced investor pressure to buy back the
stock, which reached a 12-month low yesterday, say analyst. “Our
board’s decision to authorize this repurchase initiative underscores
the rising confidence we have in Kodak’s product portfolio, in our
current financial position, and in the execution of our strategy,”
Perez said in a statement.Kodak halted a $2-billion buyback programme
in March 2001 to pay down debt and make acquisitions as sales of
traditional film products slowed. Perez completed a four-year
restructuring program to boost sales of digital products such as
cameras and a new line of inkjet printers. Kodak has spent $3.4 billion
to cut 28,000 jobs as demand for its film products continues to drop.
The
company has been struggling to turn a profit and in April posted a
first-quarter loss that was wider than analysts expected because of
higher material and research costs. The company said in May it will
raise prices as much as 20 per cent on film, paper, printing plates and
other items that use silver and aluminum.However, the news hasn’t been
all bad. After completing a $3.4 billion overhaul from 2004 to 2007,
Kodak predicted at its annual investor meeting in February that
revenues would rise 5 per cent a year through 2011, driven by a 10 per
cent to 12 per cent annual rise in digital sales. Operating profits
will more than triple to $1 billion, it said.The refund from the US
Internal Revenue Service resulted from an audit of claims filed for
1993 to 1998, the company said. It will fund the buyback plan, together
with cash on hand, and it will boost second-quarter net profit by $574
million.Way back in 1088, with the slogan “you press the button, we do
the rest,” George Eastman put the first simple camera into the hands of
a world of consumers. In so doing, he made a cumbersome and complicated
process easy to use and accessible to nearly everyone.