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Not a pretty picture

Marketplace Staff May 4, 2006

TESS VIGELAND: One of Wall Street’s blue chips is looking more black and blue today. Eastman Kodak says it lost $298 million last quarter. That’s a lotta red ink, and it’s the company’s sixth quarterly loss in a row. The company that was the first to mass-produce a simple camera for consumer use back in 1888 Is struggling to get with the digital age — several years after its arrival. Marketplace Business Editor Cheryl Glaser reports.

CHERYL GLASER: Almost three years ago, Eastman Kodak admitted that its traditional film business was fading. So the company drew up a plan to turn itself into a major player in digital photography, printing and medical imaging. Their deadline? 2007.

And Kodak’s made some progress towards reaching that goal, says Ron Glaz, an imaging expert with IDC.

RON GLAZ: Oh, they’ve definitely gained ground. For the past two years, in terms of camera shipments, they’ve led the industry. They’ve also led the industry in terms of small format photo printers — 4-by-6 photo printers.

But Morningstar analyst Mark Lanyon says that progress has come at a price.

MARK LANYON: They are essentially giving the stuff away at the end of the day. You see these neat camera and docking printer bundles at Best Buy and the like. Kodak simply is not making a lot of money on that.

That’s one of the reasons Kodak’s still swimming in red ink. So now the company’s thinking of selling its medical imaging division. It makes X-ray film, medical printers and other kinds of health-imaging products. Kodak’s got a lot of competition in the business. And by selling the division, the company could wipe out some or all of its $2.6 billion.

But back to the big picture. Does Kodak have a future in digital photography and printing? Morningstar’s Mark Lanyon says yes, but . . .

LANYON: Do they have to sit in the trenches and slug it out for a very small return, shipping low-end digital cameras, low-end printers? Or can they somehow finally convert this brand into a real relationship with customers?

For now, though, Kodak’s warned it could lose $850 million before the year is over.

I’m Cheryl Glaser for Marketplace.

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