From Outsourcing To Job Cuts, Kodak Announces Changes

An agreement made with Flextronics and cutting 25,000 jobs are part of cost reduction project.

Eastman Kodak Co. Tuesday announced an agreement in which Singapore-based Flextronics International Ltd will manufacture and distribute Kodak consumer digital cameras and will manage certain camera design and development functions.

Under the agreement, Kodak will divest its entire digital camera manufacturing requirements to Flextronics, including assembly, production and testing. Flextronics will also manage the operations and logistics services for Kodak’s digital still cameras. Kodak will continue to develop the high-level system design, product look and feel and user experience and will conduct advanced research and development for its digital still cameras. Kodak will also retain its intellectual property.

Approximately 550 Kodak personnel are expected to be transferred to Flextronics facilities.

Closing is expected after all required approvals have been obtained and certain other conditions are satisfied, which is anticipated during Kodak’s 3rd quarter of 2006.

This news comes on the same day that Kodak declared a 2Q loss of $282 million, coming from restructuring costs and the rising cost of silver.

In a conference call with investors, Antonio Perez, Kodak’s Chairman and CEO described the results as “generally on plan” with the company’s cost reduction restructuring project. The company has a goal of building a business model to achieve sustained success in digital markets.

According to Perez, the Flextronic agreement will allow Kodak to lower costs, as will the elimination of 25,000 to 27,000 jobs, which has been in progress since 2004. To date, approximately 20,500 jobs have been eliminated.

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