KODAK TO FALL SHORT OF OLED GOAL, WILL FOCUS ON DIGITAL

SK Display started volume production of 2.2” active matrix OLED (AMOLED) that’s at heart of Kodak EasyShare digital camera. But distribution of camera has been limited to international markets as joint venture works to increase production, spokesman said, declining comment on date for U.S. introduction of OLED- based EasyShare camera. Original goal of $500 million in sales was based on lab forecast, not on factory-level production, spokesman said, declining to provide new estimate.

Kodak used investor conference to show off 2.2” AMOLED in variety of applications including digital cameras, camcorders and Nintendo’s GameBoy Color. OLED display version of last was considerably brighter than LCD-based model demonstrated alongside it. Sharp is one of LCD suppliers for GameBoy. Kodak also has nearly dozen licensees for its passive matrix OLED technology including RiTDisplay, which has supplied subdisplay for LG Electronics-brand cellular phone for Verizon, spokesman said. OLED licensee Pioneer also has supplied OLEDs for Motorola cellular phones.

SK said it planned to have 2.5” AMOLED prototypes available by late this year for digital cameras and camcorders. It also has set sights on 3.5” and 2” OLEDs for handheld PCs and cellphones, respectively, that could be available in 2nd half 2004, Shih said. Kodak again showed 15” AMOLED prototype that’s 3-5 years from market, spokesman said.

Meanwhile, Kodak officials declined comment on plans for cholesteric “no power” LCD technology that it licensed in July from Kent Displays. Kent’s technology allows for changeable displays that can maintain images indefinitely without consuming power and be viewed at wide angles in variety of lighting conditions. Kodak is considering using Kent’s technology in commercial applications, spokesman said. Kodak was expected to demonstrate cholesteric LCD technology at investor conference, after failing to license content in time, spokesman said.

Kodak CEO Daniel Carp said company planned to slow investment in traditional consumer film as it focuses on digital. Company won’t make any long-term investments in film, nothing on par with its development of Advance Photo System (APS) in 1996.

Kodak also is planning ambitious foray into ink-jet printers to compete with Canon, Hewlett-Packard and Seiko-Epson, although such move is several years away, company said. It’s expected to expand line in digital high-end printing where Xerox has dominated.

New strategy calls for spending $2 billion on making acquisitions over next 3 years and further investment in new growth areas. Strategy will include select acquisition of technology and IP, Carp said. Goal is to expand annual revenue 5-6%, increasing sales to $16 billion by 2006 and $20 billion in 2010. Consumer business will remain flat in 2006 at about $8 billion, while commercial and health operations grow to $4 billion each, Carp said. New growth estimates are sharp departure from more aggressive forecast by former Kodak CEO George Fisher, who predicted in 1999 that company would be increasing annual revenue 8-12% by end of this year. Instead, Kodak has seen revenue fall for 4 straight years as digital moved to supplant film amid plunging prices for digital cameras and rising resolutions to rival 35 mm. “We have some infrastructure issues that we'll have to deal with,” COO Antonio Perez said. Kodak will reduce film manufacturing base while “managing cash” generated by consumer film business, he said. At same time, it will broaden line of digital cameras in 2004 and expects revenue from category to reach $1 billion by year-end, Digital & Film Imaging Systems Pres. Bernard Masson said.

Increased emphasis on digital will result in category’s accounting for 60% of company’s annual revenue by 2006, up from current 30%, while film slips to 40% from 70%, it said. In effort to wring sales out of declining film market, Kodak will pursue private label business largely in international markets, Carp said. Traditional film revenue is projected to shrink 6-8% annually through 2006, while digital sales rise at 26% clip. Shift in strategy will be accompanied by Kodak’s moving to close or sell off businesses as it continues to reduce work force, which has shed 30,000 jobs since 1997. It announced in July it would eliminate another 4,500-6,000 positions, move expected to yield saving of $275-$325 million in 2004.

Kodak venture into ink-jet printing represents sharp reversal for company that previously relied on thermal-paper technology. Kodak has portfolio of ink-jet patents. Its earlier forays into consumer printing market haven’t been successful. Its joint venture 3 years ago with Lexmark to introduce desktop ink-jet photo printer flopped because camera-to-printer interface never caught on in market where most consumers were more accustomed to loading digital photos onto PCs before printing them. Second attempt in joint venture with Hewlett-Packard to market smaller digital photo printers also failed. “We'll enter the consumer ink-jet business because we have some of the technologies and, now, capabilities,” Carp said. “We know these markets very well and we have a play in them.”