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Tickers in this Article: EK, CAJ, FUJIY
Rochester, NY-based Eastman Kodak (EK) is in the midst of transitioning its core business from the money-losing consumer film capture segment to high growth digital photography, printing and imaging. Despite the negative press surrounding its slow transition and stiff competition from Canon (CAJ) and Fuji Films (FUJIY), Kodak should not be counted out.

Let's not forget that Kodak did manage $14.5 billion in revenues in 2005. While Kodak did disappoint with its recent 1st quarter results by reporting negative net income of $(298) million, the photo giant still eclipsed same period revenues by a narrow 2% margin, coming in at $2.89 billion.

Kodak made headlines in July 2005 by announcing layoffs of up to 25,000 people as the company was scrambling to reshuffle its organization and its product mix in order to compete in the new digital world. The layoffs are part of Kodak's larger 2004-2007 restarting plan that also includes reductions in manufacturing infrastructure. The changes have a target date of completion for mid-2007.

Kodak also spent part of 2005 bolstering its Graphic Communications Group. With the acquisition of Creo Inc, a provider of workflow systems for commercial printers and with the buyout of its Kodak Polychrome unit from its joint venture partner Sun Chemical Corporation, Kodak has made a strong push into the commercial and digital printing markets. The acquisitions contributed over $500 million in revenue to the GC Group, pushing revenues up 136% to $870 million during the 1st quarter.

Kodak is considering the sale of its healthcare imaging business in order to offset the accelerating losses in its Film & Photofinishing Systems Group. Kodak stands to earn $2 to $4 billion if an interested buyer comes along. Net sales for the Health care imaging business fell 7% to $585 million during the 1st quarter from the same period a year ago.

With the majority of Kodak sales typically occurring in the second half of the year, the stalwart photo giant deserves a chance to earn the trust of the individual investor. When it comes to investments, "bad" news can either mean investors should run for cover or dig deeper. In Kodak's case the signal is clear and the direction is forward into the digital future.

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