Eastman Kodak said it is exploring strategic alternatives for its Health Group, including a possible sale of the unit.
While the Health Group is turning in strong organic growth in some parts of its digital portfolio, such as digital capture and healthcare information solutions, Kodak has observed for some time a consolidation in the industry, according to chairman and CEO Antonio Perez.
"This is a very valuable business with an extremely strong brand, excellent products with market-leading positions, a tremendous heritage in the health imaging market, employees with unrivalled experience, a global customer base, and strong cash flow," Perez said. "However, industry dynamics in this industry are redefining the business model and the scale required for sustained success and leadership."
As a result, Kodak has determined that now is the appropriate time to explore alternatives, Perez said. The company has retained investment banking firm Goldman, Sachs & Co. of New York City as its adviser.
Kodak has been preparing for this possibility for some time, and will move the process forward as rapidly as possible, Perez said. Perez commented on the decision during a conference call on Thursday.
"Our principle objective is to find a strategic option to reach the full potential of the business, becoming an even stronger supplier to our customers, and create a more valuable business with increased shareholder value," he said.
Kodak’s Health Group is focused on the healthcare IT market, a segment that has been maturing for some time, said president Kevin Hobert. While that industry is taking off and its fundamentals are very strong, it’s starting to consolidate, he said.
“This consolidation offers us a great opportunity,” Hobert said. “So this is just looking at alternative ways to accelerate our growth and go after that opportunity.”
Kodak will be exploring alternatives ranging from a partnership or a joint venture, on up to divestiture of the group, Hobert told AuntMinnie.com.
Kodak feels that its biggest asset is its brand, Hobert said.
“As we go through this process, we’re going to keep everyone that we work with, starting with our customers, but also our employees, our distributors, our OEM partners, and our suppliers, foremost in our thinking,” he said. “We’re going to do nothing to undermine, and everything we can to reinforce, the customer trust that we’ve built up.”
The Health Group's financial performance has slipped in recent quarters. In its first quarter (end-March 31), sales were $585 million, down 7% from the $626 million reported in the first quarter of 2005. Earnings from operations also dipped, dropping from $78 million last year to $46 million.
The results were primarily due to lower earnings from traditional radiography film and digital output segments, and higher silver costs, according to the firm. These factors were partially offset by improved earnings in computed radiography, healthcare information systems, and digital radiography, Kodak said. Earnings from digital products were $17 million, down from $33 million last year.
The Health Group's sales and earnings also declined in the fourth quarter of 2005. For that period (end-December 31), the division posted sales of $700 million, down 6% compared with the $742 million booked in the fourth quarter of 2004. Earnings from operations dipped from $113 million to $83 million.
By Erik L. Ridley
AuntMinnie.com staff writer
May 4, 2006
Related Reading
Kodak unveils mammo workstation enhancements, April 27, 2006
Kodak notches Canadian CareStream order, April 25, 2006
CompuMed inks licensing deal with Kodak, April 19, 2006
Kodak gets FDA OK on cardiac PACS apps, April 11, 2006
Kodak books multiple Q4 contracts, February 3, 2006
Copyright © 2006 AuntMinnie.com
