Kodak plans to build on its foundation in consumer, medical and professional film imaging products and services with the power of digital technology to become a more balanced and diversified leader in the digital imaging market. Kodak is transforming its business portfolio with an emphasis on digital commercial markets. Its plans include leveraging its significant presence, and strong growth, in commercial markets and health imaging; refocusing research and development costs on bigger, bolder ideas; accelerate investments in commercial markets; and acquire other companies and technology to broaden Kodak's portfolio of digital products and services. Kodak anticipates spending as much as $3 billion on investments and acquisitions to achieve its 2006 revenue goal (sales of $16 billion by 2006).

The Health initiatives involve gaining more market share in the digital capture of medical images and building an information services business that takes full advantage of the convergence of images and information technology. Dan Kerpelman, who joined Kodak last year from General Electric Co., will continue to lead this effort.

Kodak has tried this before by trying to partner with Hewlett Packard. The alliance however was called off earlier this year and it now remains to be seen how Kodak will successfully exploit the digital marketplace. It no doubt will have a head start in Healthcare given its leading positioning but also given that it has been slow to acknowledge the market reality and that this move has been forced on it, there is a question of whether it will be able to lead this marketplace. We believe that Kodak will have to acquire a few more companies especially if it wants to create a leading services play.

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