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Kodak Snags Online Photo Service

Eastman Kodak Co. Monday moved to expand its online photo offerings with a definitive agreement to acquire Emeryville, Calif.-based Ofoto Inc., which will serve as a connection between Kodak's film scanning and uploading services and the output capabilities of its Qualex Inc. subsidiary.

The acquisition is intended to help Kodak create a "complete online photography experience," which ranges from capture devices and film scanning and storage infrastructure to online services and output media.

Ofoto, with 1.2 million registered users, offers digital processing of digital images and traditional film, prints, private online image storage, sharing, editing and creative tools, frames, cards and other merchandise. Kodak said the firm will operate as a wholly owned subsidiary and will be led by its existing management team, which will report to Willy Shih, president of Kodak's Digital and Applied Imaging unit.

Kodak already operates a portfolio of Web offerings, including kodak.com, Kodak PhotoNet Online, the Kodak Picture Center online at CVS.com, and the Kodak-sponsored "You've Got Pictures" service on America Online. The company said that Ofoto, together with its PictureVision subsidiary and kodak.com, will serve as the cornerstone of its Internet imaging infrastructure and service offerings.

"The acquisition enhances our leadership in the growing market for online photo services," Shih said. "By combining Kodak's and Ofoto's technology, marketing and distribution assets, we will be able to deliver the most comprehensive, easy-to-use online photography services to customers and consumers. This will accelerate Kodak's growth and drive more rapid adoption of online photography."

The company said it will drive market growth by integrating Ofoto's Web site, infrastructure, e-commerce capabilities and digital printing expertise with its film-scanning infrastructure and network services and Qualex's output capabilities.

"We anticipate bringing Ofoto's capabilities to our retail customers as soon as possible through the Kodak Picture Center online initiative," said Daniel Palumbo, president, Consumer Imaging, and senior vice president, Kodak. "Combining Ofoto's capabilities with the existing service will provide our retail customers with even richer features and more ways to generate revenue.

Financial terms of the deal were not disclosed. Kodak said it expects the acquisition to be slightly dilutive this year.



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