Eastman Kodak Co. (EK), undergoing a bumpy transition to digital photography, reported its fifth consecutive quarterly loss Monday. For the first time, the company said it generated more annual sales from digital imaging than from film-based technology.

While overall earnings appeared to beat Wall Street expectations, Kodak shares tumbled more than 3 percent on lower-than-expected profits from its digital business.

Largely because of restructuring costs, Kodak lost $52 million, or 18 cents a share, in the October-December quarter, compared with a loss of $59 million, or 20 cents a share, a year ago.

Sales rose 12 percent to $4.197 billion, up from $3.76 billion in last year's fourth quarter.

Excluding restructuring and other one-time items, Kodak earned $151 million, or 51 cents a share. The mean forecast among analysts surveyed by Thomson Financial was for earnings of 39 cents a share on sales of $4.15 billion.

However, Kodak's digital profits of $161 million, hit by year-long shortfalls in its health-imaging business, were lower than expected, analysts said.

"Some of us were looking for $175 million in digital earnings," said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York.

Kodak shares fell 83 cents, or 3.2 percent, to $25.54 on the New York Stock Exchange.

Kodak reached an income tax-refund settlement with the Internal Revenue Service in November that boosted its quarterly profit by $243 million, but it also racked up $283 million in after-tax restructuring charges.

While stung once more by the rapid slide in film sales, Kodak found solace in its steady drive into the digital era. Its overall digital sales in the quarter surged 45 percent to $2.67 billion, while revenues from film, paper and other chemical-based businesses slumped 21 percent to $1.51 billion.

For all of 2005, Kodak lost $1.37 billion, or $4.76 a share, versus a profit of $556 million, or $1.94 a share, in 2004. Revenue rose 6 percent to $14.27 billion from $13.52 billion.

Digital sales accounted for 54 percent of total revenue for the year, marking the first time in the company's 125-year history that digital exceeded traditional sales.

While digital sales could grow by 16 percent to 22 percent in 2006, Kodak expects its overall sales will range from a decline of 2 percent to a gain of 4 percent. And while digital profits could rise to $350 million to $450 million, Kodak projects an overall operating loss of $900 million to $1.1 billion this year.

"We are now more than halfway through our transformation, and we have proven our ability to drive sales in digital markets and to generate the cash necessary to fund our growth," Chief Executive Antonio Perez said. "We enter 2006 with solid momentum and a stronger emphasis on profitable growth."

Perez said Chief Financial Officer Robert Brust plans to retire next January when his employment contract expires. Brust joined Kodak in 2000 from Unisys Corp., the technology services company, after a 31-year career at General Electric Co. (GE).

In July, Kodak disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004. It had acknowledged in September 2003 that its analog businesses were in irreversible decline and outlined an ambitious strategy to become a digital heavyweight in photography, medical imaging and commercial printing by 2007.

The transition triggered nearly $3 billion in acquisitions but carried a high cost. The shutdown of film and other manufacturing operations around the world looks likely to drop its global work force below 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988.

By 2008, Kodak expects 80 percent of revenue will come from digital, and overall sales will top $17 billion, up from $13.52 billion in 2004.

Kodak said its digital camera sales rose 41 percent in the quarter, while sales of home printers and accessories soared 65 percent and kiosk sales were up 23 percent. But its digital and film imaging sales fell 3 percent to $2.51 billion and its operating profit dropped to $76 million from $135 million a year ago.

Health imaging sales fell 6 percent to $700 million, and operating earnings fell to $83 million from $113 million.

Graphic communications sales soared 141 percent to $942 million, helped in part by its $980 million buyout of Canada's Creo Inc., and operating earnings reached $40 million, compared with a loss of $15 million a year ago.