$720m sale boosts Kodak strategy
 |
Kodak's sale of its none-core sensor systems business means more cash to pour into the digital photography market.
Story Tools
YOUR E-MAIL ALERTS
|
Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.
Or, visit Popular Alerts for suggestions.
|
|
NEW YORK, (Reuters) -- U.S. industrial conglomerate ITT Industries will buy Eastman Kodak's remote sensing systems unit for $725 million in cash to broaden its satellite business.
Kodak, in the midst of a broad restructuring as it shifts focus to high-growth digital imaging markets and away from the waning film market, said it would realise a net gain of $430 million from the sale of its satellite systems unit.
The RSS unit provides specialized imaging products to government, aerospace, and defense customers.
Kodak spokesman Gerard Meuchner said Monday the business "was essentially a stand-alone operation, and we have decided to divest it to focus attention on those businesses in which we see potential for growth".
He said this meant Kodak would continue to focus on consumer, health and commercial imaging.
ITT, based in White Plains, New York, makes industrial water pumps and ground-station satellite control services. It said the purchase of the remote sensing unit will modestly add to earnings in 2004.
"It gives us a leadership position in space-based sensors and information processing -- a market we see with extremely good growth potential," ITT spokesman Tom Glover said.
"One of our growth strategies is acquisition (to grow) core businesses, and space is definitely a core business for us," Glover said.
Kodak's RSS unit employs 1,800 workers and generated $425 million in 2003. ITT's defense electronics and services segment, which includes its space business, employs 10,000 and generates revenue of $1.8 billion.
The sale would likely not hurt Kodak's transitional strategy and may help fuel its plan to buy businesses with digital assets, Standard & Poor's analyst Steve Wilkinson said.
"Net cash proceeds of about $475 million will provide flexibility for Kodak to reduce debt, while also making acquisitions to enhance its position in digital imaging in core markets," he said.
Skepticism met ITT's side of the deal. S&P said it may cut its rating on the company because ITT is taking on more debt to finance the acquisition. Downgrades, or threats of downgrades, often boost a company's borrowing costs because investors demand to be paid more for the perceived higher risk.
ITT revised its 2004 earnings outlook to a range of $4.15 to $4.25 per share from its earlier range of $4.05 to $4.25 per share.
Kodak said it raised its outlook for 2004 net earnings based on the expected gain from the sale.
It said its outlook for operating earnings for the year is unchanged, although the sale will dilute earnings by 5 cents per share.
Kodak said it now sees net earnings of $2.25 to $2.75 per share, up from its previous forecast of 80 cents to $1.30. Operating earnings for 2004 are seen at $2.25 to $2.55 per share.
Shares of Kodak rose 11 cents to close at $29.47 Monday, while ITT closed down 45 cents at $76.60.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
