Eastman Kodak Co. (EK), which is navigating a tough transition to digital photography, swung to a loss in the first quarter and missed Wall Street forecasts by a wide margin because of a steady slide in revenues from film and other chemical-based businesses and higher-than-expected costs to cover steep job cuts. Its shares fell nearly 8 percent in early trading.

The world's biggest film manufacturer said Friday it lost $142 million, or 50 cents a share, in the January-March period, compared with a profit of $21 million, or 7 cents a share, in last year's first quarter.

Excluding a charge of 53 cents related to cost reductions, Kodak posted a profit of 3 cents. Analysts surveyed by Thomson Financial had forecast earnings of 33 cents a share.

Sales fell 3 percent to $2.83 billion from $2.92 billion. Analysts had expected revenues to be flat compared with a year ago.

"While the first quarter's performance was disappointing, such short-term volatility is to be expected as we transform Kodak into a digital company," said Kodak's chief executive, Daniel Carp.

Kodak shares fell $2.39, or 7.9 percent, to $28.01 on the New York Stock Exchange (search), where they have traded in a 52-week range of $24.75 and $35.19.

Sales of digital products and services in all its businesses rose 23 percent to $1.32 billion, helped by a sharp rise in sales of cameras, kiosks and thermal printers. But revenues on the analog side dropped 18 percent to $1.51 billion, 2 points steeper than predicted.

In the digital photography and motion-film unit, sales fell 9 percent to $1.8 billion in the quarter while operating earnings plunged to $4 million from $25 million. Worldwide sales of consumer film to dealers sank 29 percent, in part because of temporary reductions in inventory among retailers, particularly in China.

Kodak's transformation is difficult to gauge "because there are so many moving pieces," said analyst Shannon Cross of Cross Research in Short Hills, N.J. "This quarter proves that it's very difficult to execute on a consistent basis. The volatility is going to remain for, I would say, at least a couple years."

In the shrinking film-based businesses, "you don't know how fast the demand is going to fall off and how quickly restructuring is going to be able to offset the pressures from lower demand," she said. "And then you've got a digital business where you're moving into new business lines, you don't know how fast those are going to grow and you don't know the margins."

Health imaging sales eased 1 percent to $626 million, reflecting lower-than-expected sales of digital products and services that the company blamed on operational issues. Graphic communications sales rose 30 percent to $368 million, largely because of its buyout last May of the NexPress Solutions (search) joint venture.

The results contain a variety of other charges and costs totaling 13 cents a share, including higher-than-expected fixed costs of 7 cents per share from traditional manufacturing slowdowns at year-end.

Kodak also said that savings generated by earlier cost-cutting were offset by the lower sales of traditional products, rising raw material prices and costs associated with NexPress.

The company reiterated its per-share operational earnings guidance of $2.60 to $2.90 for all of 2005. Analysts currently forecast full-year earnings at $2.61 per share.

Kodak grew into an icon on the strength of its traditional film, paper and photofinishing businesses. It is now betting its future in digital terrain — from cameras, inkjet paper and online photofinishing to photo kiosks and minilabs, X-ray systems and commercial printers.

The company is eliminating 12,000 to 15,000 jobs by 2007, trimming its work force to around 50,000.

The three-year, cost-cutting plan was expected to result in charges of $1.3 billion to $1.7 billion, with cost savings of $800 million to $1 billion by 2007.