Kodak in $1-billion buyback; shares soar

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. (See: Daimler's stock rises on announcement of €6 billion share buyback)

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 analysts.

"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.