Editorial ::: January 2004

Kodak to Stop Selling Traditional Cameras in U.S.
by REUTERS

Published: January 13, 2004

Filed at 6:06 p.m. ET

NEW YORK (Reuters) - Eastman Kodak Co. on Tuesday said it will stop selling traditional film cameras in the United States, Canada and Western Europe, another move by the photography company to cut lines with declining appeal in favor of fast-growing digital products.

With sales of digital cameras poised to overtake film cameras for the first time this year, Kodak is redefining itself in an effort to keep pace.

But the No. 1 maker of photographic film will continue to sell one-time use cameras in the West and expand its sales of these and other film-based cameras -- and film -- in emerging markets where demand is on the rise.

Shares of Kodak eked out narrow gains on Tuesday after the announcement, and was one of the few blue chip stocks to close higher on the New York Stock Exchange.

The move comes amid Kodak's controversial plan to focus on high-growth digital products, such as medical imaging systems and production printing, and reduce dependence on its declining film business. Late in 2003, Kodak said it would stop making slide projectors, but still manufactures color slide films.

"Every one of these steps indicates more and more the strength of Kodak's conviction of moving toward digital,'' said analyst Shannon Cross of Cross Research. "However, the jury is out on whether (the digital strategy) will work.''

Blaming declining demand, the Rochester, New York-based company said it would by the end of this year quit making reloadable cameras that use 35-millimeter film, including those in the Advanced Photo System, or APS, format.

In 1996, when it was unveiled, Advantix was hailed by Kodak as the "most important photographic announcement since Instamatic cartridge-loading cameras were introduced in 1963."

Film Still Growing in Emerging Markets

Kodak will still make film for existing Advantix and other cameras, and intends to introduce new high-performance 35 millimeter and Advanced Photo System films next month.

Camera makers typically make little profit -- or lose money -- on hardware, but enjoy strong margins from sales of supplies such as film and paper, which much be replaced frequently.

Kodak said that it plans to continue making reloadable cameras that use 35-millimeter film in emerging markets, such as China, India, Eastern Europe and Latin America and that it will introduce six new cameras in those markets this year.

``(We) estimate that there are 60 million Chinese consumers who have the purchasing power to participate in photography, but have not bought their first camera,'' said Kodak spokesman Charles Smith.

Under Kodak's new strategy, unveiled in September, it will shift its investments into digital markets with greater growth potential than the waning film market. But film still provides ample revenue for Kodak -- over 120 million rolls of film are sold each year industry-wide.

According to estimates by InfoTrends Research Group, global film camera shipments in 2004 will shrink to 36 million units from about 48 million in 2003, while digital camera shipments will rise to 53 million from 41 million units.

Other companies that helped develop APS -- Canon Inc, Fuji Photo Film Co. Ltd., Minolta Co Ltd., and Nikon Corp. -- will continue to make APS cameras.

``The consumer who has APS likes it a lot, but the growth potential is probably tapped out from Kodak's standpoint,'' said Gary Pageau, spokesman of the Photo Marketing Association, an industry organization.

Shares of Kodak closed up 3 cents at $26.36 in New York Stock Exchange trade on Tuesday.