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Digital Photography Starting to Reflect Traditional Market

While many companies are streamlining their Web strategies in the face of the current economic downturn, Eastman Kodak Co. is ramping up.

The company said Wednesday that between 2001 and 2005 it will bolster its digital products and services strategy with internal and external investments and acquisitions funded by at least $6 billion in free cash flow.

"Driven by infoimaging -- the convergence of images and information technology -- Kodak sees ample room for growth in both its commercial and consumer businesses, especially as the economy rebounds," the company said Wednesday. "The opportunities created by the infoimaging industry will help the company capitalize on its strategy of expanding the market for digital products and services."

Underscoring its aggressive posture, the company Monday move d to acquire digital photography fulfillment firm Ofoto Inc. The company sees Ofoto's technology as a cornerstone of its online presence.

This morning, Kodak unveiled a strategy to bundle digital services into its film processing business. The company plans a national advertising campaign to help communicate bundling and new product rollout.

Of course, Kodak is not alone in continuing to push the digital revolution. Fuji Photo Film U.S.A. Inc. Tuesday took to the road Tuesday with a new national marketing campaign, the FinePix "Picture of America" Tour, intended to create awareness of its digital cameras, photographic services and other digital products.

"Even though consumer interest in digital photography is soaring, many consumers are hesitant to jump into digital imaging because it seems too complex," said Stanley E. Freimuth, executive vice president and chief operating officer of Fuji Photo Film U.S.A. The FinePix tour is intended to counteract that perception by making the technology more accessible.

Meanwhile, Kodak is moving now because it hopes to position itself for vigorous growth when the economy turns around.

"Kodak intends to take advantage of the economic slowdown to strengthen its market position and reduce its cost structure so that we are positioned for maximum benefit once the economy's growth accelerates," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "The completion of our manufacturing project in China, the less capital-intensive nature of digital products, and improved inventory management will provide Kodak the free cash flow to fund growth and make acquisitions. Kodak's planned acquisition of Ofoto is just one example of how the company is pursuing new opportunities created by infoimaging."

Like Fuji, Kodak is also recognizing that many consumers are intimidated by the new technology, so it is making its new EasyShare digital camera system a cornerstone of the hardware end of its plan. The camera is designed to make it easier for consumers to upload pictures to computers for printing and sharing.

The company is also pursuing a licensing strategy for its intellectual property in the digital camera and consumer online photo sharing areas, hoping to create standards that will expand the market.

"While the economic slowdown is crimping consumer spending, in no way does it deter Kodak from pursuing our strategy of using digital technologies to create a bigger picture business than exists today," Carp said. "The convergence of imaging and information technology will mean more opportunities for Kodak."