Kodak Raises Digital Sales Outlook; Shares Up

Eastman Kodak Co. (EK) on Wednesday raised its growth forecast on digital products and services, the areas the photography company is depending on to offset a rapid decline in its traditional film business.

Kodak, whose shares were up 3.5 percent, said digital products will account for more than half of its total sales next year. The forecast comes one year after the company disclosed a controversial plan to slash investment in film products by selling units and cutting up to 15,000 jobs by 2006.

Kodak's chairman and chief executive, Daniel Carp, said the Rochester, N.Y.-based company will cut spending in the film business even more if the decline gets worse.

The reductions "are key to driving the cash out of that piece to reinvest in the digital businesses as we go through this transition," Carp said.

Kodak, the world's largest maker of photographic film, said it expects sales of digital products and services, including cameras and medical imaging, to increase 36 percent a year between 2003 and 2007. That compares with an earlier forecast of 26 percent.

The company also backed its near and long-term profit forecasts. Its operating earnings target is $3 per share on sales of $16 billion in 2006.

It sees earnings from continuing operations, excluding special items, of $1.25 to $1.55 per share for the final two quarters of the year. It expects net earnings of $1.71 to $2.01 per share.

Wall Street analysts expect earnings, excluding special items, of 71 cents a share in the third quarter and 69 cents a share in the fourth quarter, according to Reuters Estimates (search).

For the period 2003 to 2007, the company projects total revenue growing at an annual rate of 7 percent to 8 percent.

Kodak's sweeping restructuring was brought on by the fast rise of digital cameras, which use no film and can be viewed on a screen, thereby requiring neither Kodak's processing or paper products.

Some Wall Street analysts still warn that the decline in consumer demand for film, which is still Kodak's top generator of revenue, may occur faster than Kodak can develop its digital offerings.

But investors have warmed to Kodak, whose stock recently rose to its highest level since January 2003. The stock climbed $1.11, or 3.5 percent, to $32.78 on the New York Stock Exchange (search).