Eastman Kodak, the legendary photo company, saw its credit rating downgraded on Friday to "junk bond" status by Standard and Poor's, which cited an "accelerated decline" in its core business.
Kodak shares plunged more than nine percent on a gloomy day for the company in which it also reported falling earnings and a wider-than expected loss for the quarter.
In a rating note, Standard and Poor's cited "uncertain profit prospects" for Kodak in its new efforts in the emerging digital photography sector.
The rating firm said Kodak debt would now carry a "BB+" rating, a notch down from "BBB-," which was the lowest investment-grade rating.
The downgrade means the company's bonds are considered more risky, and precludes many pension and portfolio managers from investing in the debt.
Standard and Poor's said Kodak, one of the pioneers of the photo industry, faces an uncertain outlook due to a move to a more competitive environment in digital photography.
"The ratings reflect the declining prospects for the core traditional imaging businesses that produce a strong majority of Kodak's profits, an increasing reliance on unproven and emerging businesses," Standard and Poor's said.
Earlier Friday, the Rochester, New York firm said it posted a net loss of US$142 million in the first quarter, owing to lower sales and costs of restructuring the group. Revenues were down three percent from the same period a year ago to US$2.83 billion.
"The loss reflects charges for focused cost reductions, while the company's sales reflect a decline in traditional products and services of 18 percent and an increase in the digital portfolio of 23 percent," the company said in its report.
It was the second consecutive quarterly loss for the world's biggest film and camera company, which is in the midst of an extensive transition away from its traditional film-based business and into the booming realm of digital photography.
Part of that transition involves cutting up to 15,000 employees by 2007, brining its payroll down to about 50,000.
"While the first quarter's performance was disappointing, such short-term volatility is to be expected as we transform Kodak into a digital company," said Kodak chairman and chief executive Daniel Carp.
"We remain committed to increasing the value of the company over the long-term by delivering on our annual plans. We expect to do that in 2005 and beyond."
Kodak stock meanwhile plunged US$2.85, or 9.4 percent, to close at US$27.55.
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