Kodak restructures to ramp up digital business; health unit is on the block

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Eastman Kodak Company announced this morning a strategic reorganization in an effort to gear itself for further grown in the booming digital technology market. A big part of this change will come in the selling of the Health Group — and Kodak said today it is looking for buyers.

Kodak’s Health Group saw 2005 revenue of $2.7 billion, and has served as a global provider for a number of health imaging modalities, including digital x-ray capture, medical printers, and x-ray film. Nonetheless, the group’s fate is in limbo.
            
“Our stated corporate goal is to be among the top three in each of the businesses in which we compete,” said Antonio M. Perez, chairman and CEO, Kodak. “While the Health Group is enjoying strong organic growth in elements of its digital portfolio, such as digital capture solutions and healthcare information solutions, we have been observing for some time consolidation in this industry. Given our valuable assets and the changing market landscape, we feel that now is the time to investigate strategic alternatives.”
           
Goldman, Sachs & Co. is advising Kodak on the sale of the Health Group. And despite a rumor of a potential suitor floating around at last week's annual meeting of the Society for Imaging Informatics in Medicine (SIIM, formerly SCAR), no public announcements have yet been made as to which companies may be interested in the purchase.
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To listen to a voice clip from Kodak Health Group President Kevin Hobert regarding the potential sale and impact on customers, please click here.

Outside of the Health Group, Kodak plans to assign manufacturing facilities to specific business units and streamline certain administrative functions. The changes will emphasize accountability among the businesses for product manufacturing and inventory, while also enabling further cost reductions and were part of the company’s consideration when the total employment reductions were announced last year, Kodak said.   

As for the business units, the company is restructuring and the following changes will take shape by July 1:

  • Units of the Global Manufacturing & Logistics  (GM &L) organization will be aligned with and integrated into relevant  business units or functions;  
  • The Chief Administrative Office (CAO) will be  disbanded and the reporting relationships of its units shifted within the  company;

Also, three senior officers will retire later this year, after the changes are implemented:

  • Charles S. Brown, Jr., senior vice president, and  chief administrative officer;
  • Daniel T. Meek, senior vice president and director,  GM &L;
  • Charles C. Barrentine, vice president and director,  Kodak Operating System.

New leadership for the units — formerly known as GM &L operations — will report to the following executives: Darrell A. Clapper for Health Group (HG), Theodore D. McNeff for Consumer Digital Imaging Group (CDG), John S. Robinson for Graphic Communications Group (GCG), and Paul A. Walrath for Film & Photofinishing Systems Group (FPG). 

“As a result of the rapid and effective actions we have taken over the past two years to restructure our manufacturing assets, we can increasingly assign responsibility for manufacturing to the business units that the production facilities support,” Perez said. “In one sense, this marks the last break with the ‘economy of scale’ manufacturing model that served our company so well for more than 120 years. In a digital age, we need to make decisions faster and better, and these changes will enable that.