AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWalnut’s Malik Khouzam voted Southern California Boys Athlete of the Week Others, however, predict that the multiyear transformation, which includes the elimination of 25,000 jobs, almost inevitably will lead to even bigger changes in the years ahead. “They’ll probably make it to digital, but it may not be the Kodak we know,” said Christopher Hayes, chief investment officer of Hayes-Fischer Capital Management of Rochester. “As you go from a monopoly to a commodity type of business, you could see Kodak split up in different pieces,” he said. “I think people feel that way more, now that you have non-Kodak people running the company. There’s not as much allegiance.” At an investor’s meeting last month, CEO Perez scaled back short-term profit expectations – in part because of fears that high gasoline prices and Gulf Coast hurricane damage would slow the economy. But he was bullish about prospects for 2006 and beyond. “We are at the phase now where digital is still coming up,” Perez said. “You’ll start to see it next year very clearly. Three years ago, film was still here, so it was covering up a lot of the sins. And last year … it was still covering up some of the sins. So we are at the worst possible place.” ROCHESTER, N.Y. – Halfway through a four-year digital makeover, as its quarterly losses mount, Eastman Kodak Co. has some analysts wondering if the picture-taking pioneer is headed for a breakup. But even as Kodak reported a $1.03 billion loss for the third quarter, its new leadership – largely recruited from digital heavyweights like Hewlett-Packard Co. – say the results show they’re making real progress symbolized by one historic milestone: Sales of digital products now exceed revenue from film-based photography for the first time. Patent-rich Kodak, they also point out, is No. 1 in sales of digital cameras and digital X-ray systems in the United States and photo kiosks, thermal home printers and online photo services worldwide. “Overall, we’re expecting a year of good progress in a historic transition,” said Chief Executive Antonio Perez, a former Hewlett-Packard stalwart who took the helm in June. Kodak shares briefly hit a two-year low Wednesday when the company reported its fourth quarterly loss in a row, which included $900 million in noncash charges related to its huge overhaul. In trading Friday, Kodak closed at $22.29 – at the low end of a 52-week range of $20.91 to $35.19. The biggest news in the earnings release may have been that digital sales surged 47 percent to $1.89 billion. Kodak is hoping film, its cash cow for a century, will continue to bring enough cash as it steadies on its new bearing. But the clock is running down. Third-quarter revenues from traditional businesses fell 20 percent to $1.66 billion, and film sales could drop more than 30 percent in the United States this year. Kodak and Japanese archrival Fuji Photo Film Co. aren’t the only film-and-paper manufacturers reeling from ever fiercer competition as the digital revolution sweeps through. Germany’s AgfaPhoto, which has failed to find a buyer, warned Wednesday of the possibility of going out of business by year-end. Kodak finally acknowledged in fall 2003 that its analog businesses were in irreversible decline and outlined a strategy to become a digital front-runner in photography, health imaging and commercial printing by 2007. It embarked on a nearly $3 billion shopping spree but also began shutting film, paper and other raw-materials factories around the world. By 2007, its work force could plummet to World War II levels of under 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988. By 2008, Kodak expects 80 percent of revenues will come from digital and overall sales will top $17 billion, up from $13.52 billion last year. The health-imaging wing, which accounts for 20 percent of sales, and the swelling graphic communications business will increase profits steadily through 2009, it said. Greg Kieliszek, chief information officer at the Watauga Medical Center in Boone, N.C., said he was surprised at the range of Kodak offerings in the digital computed radiography field – and the help Kodak provided this year in re-equipping the 120-bed hospital. “They have treated us not like a little hospital that we ought to be grateful they’re talking to, but like a partner – it’s impressive,” he said. The focal point for 124-year-old Kodak, analysts agree, is still finding ways to profit from high-margin services and supplies – inks, chemicals, printer ribbons, paper, software. Founder George Eastman turned point-and-shoot photography into an overnight craze in 1900 when he came out with a $1 Brownie. But he sold cameras “at about cost or at a loss” for years to create demand for highly profitable silver-halide film and paper, said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York. “You first have to sell the digital cameras, the printers, the medical equipment for them to generate profits,” Yannas said, noting that Kodak’s losses from digital investments reached about $1 billion in 2001. “Kodak is not as profitable as it used to be but is heading that way,” he said. “Digital profits should comfortably be in excess of $1 billion by 2007. “I’m a fan, an optimist,” Yannas acknowledged. “But this is, incidentally, a company I used to dislike for years. It was a hidebound company, and I only started liking the changes in management around 1997. “They don’t have a history as a digital company, but they have the three requirements to support it: technology, management and – more important probably than anything – distribution. Their deliverance cannot happen in one quarter, in one year, but they have the best name in imaging and their quality continues to be proven out.” 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!