HP Leaps Into Photofinishing Market

Hewlett-Packard Co. Monday unveiled an aggressive strategy to elbow its way into the photofinishing market at the
Photo Marketing Association (PMA) Tradeshow.

The company has partnered with high-performance color printing systems provider Indigo N.V., Eastman Kodak Co., and online photo
services provider Shutterfly, as part of an effort to become a complete digital imaging solutions provider to both central and
on-site retail photo labs.

“It is clear that digital imaging and printing are undergoing major transformation, and HP is a key driving force behind this,” said
Vyomesh Joshi, president of HP Imaging and Printing Systems. “In fact, it is expected that in the next couple of years some 111
billion digital images will be printed annually. With our entry into photofinishing, we are extending our competitive leadership
across the digital imaging and printing markets.”

The company is pursuing the strategy with a multi-pronged approach. First, with help from Indigo, HP plans to extend its printing
systems portfolio beyond inkjet and dry laser technology to include high-speed color printing. This would allow it to serve the
high-capacity needs of central photofinishing labs with advanced, high-speed digital color printing systems that provide an
all-digital workflow.

HP expects central photofinishing labs will find such a solution compelling, because all-digital workflow would eliminate manually
intensive batch-production processes and top line growth from servicing the digital capture market.

On the in-store retail front, the company introduced the Phogenix Imaging DFX, the result of a two-year collaboration with Kodak
focused on creating a new category of digital photofinishing equipment that offers retailers an easy-to-use, affordable digital
system for customers’ digital photofinishing needs.

HP said DFX is a full-featured minilab that utilizes HP’s thermal inkjet technology. It produces standard 4 x 6-inch prints, but
also offers the ability to produce mixed and digital orders for one-hour fulfillment, high-value products like custom print
packages, specialty-sized posters of up to 12 x 18-inches, calendars, greeting cards and CD-ROMs. DFX uses an in-line finishing
system that allows multiple formats to be produced from a single roll.

For consumers, the company unveiled HP Memories Disc Creator digital imaging software, which allows consumers to create personalized
photo slide shows, add music and a title page, and then play the shows on their PCs or television via a DVD player. HP said it
expects the software to be available in March at an estimated street price of $29.95.

Finally, HP’s strategy wouldn’t be complete without a Web component. The company already has an online photo-sharing site,
hpphoto.com. To round out that offering, the company partnered with Shutterfly to provide online print fulfillment.

The partnership also makes Shutterfly part of HP’s strategic consumer initiative, by supporting HP’s new HP Instant Share
technology — part of the new HP Photosmart 812 digital camera — which allows users to take a picture with the camera and
immediately decide how to share the image, including through e-mail or with prints.

“Companies that are capable of looking into the future to anticipate the digital imaging needs of consumers will be the ones that
best capitalize on the available business opportunity,” Joshi said. “Today, HP has done this with a one-two punch — on the retail
side, with our entry into photofinishing, and on the consumer side, with the extension of our digital imaging offering.”

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