Kodak is to stop selling traditional cameras in Western Europe, United States and Canada because of declining demand.
The company intends to stop making Advanced Photo System (APS) cameras and reloadable 35-millimeter cameras by the end of the year. They will continue to sell single-use cameras.
The move reflects the fast-growing market for digital cameras. The Photo Marketing Association told Forbes that the popularity of digital cameras had helped reduce film sales in the US by 2.8 per cent in 2001.
And, according to the investment team at Deutsche Banc Alex. Brown, digital technology will replace traditional film much faster than most analysts expected, decreasing sales by 4.5 per cent in 2002 and 6.8 per cent in 2003.
Deutsche Banc Alex. Brown analyst Peter C. Ausnit told Forbes "The cannibalizing effect of digital cameras has already whacked the volume-sensitive firm. The company saw sales fall to $13.2 billion in 2001, compared to $14 billion in 2000."
Camera makers like Kodak typically enjoy their strongest margins from sales of supplies such as film and paper. According to Ausnit: "Consumer film accounts for about 25 per cent of Kodak's total sales, or about $3.5 billion."
The Photo Marketing Association predicts that the US film market will peak at one billion units per year in the next two or three years and then drop because of increased digital camera use. In the meantime, the popularity of digital cameras is expected to increase, further eroding revenue from traditional film for companies like Kodak.
According to Reuters, Kodak shares rose in early trading after the announcement, and was the biggest percentage gainer among blue chip stocks.