Kodak 2003 Annual Report Download - page 4

Management’s Letter
4
this momentum, the Company introduced new Kodak ultima picture paper
with ColorLast technology, providing long-lasting prints.
The Kodak network. During the year, we made significant progress in
assembling the components of the Kodak digital imaging network, which
enables consumers to enjoy their picture experience anytime, anywhere –
at home, on the go and at retail. A key component includes our Ofoto
online picture service. Its sales grew more than 50 percent as picture
uploads increased 98 percent year-over-year. Ofoto online membership
now totals more than 11 million users, and during the year it expanded
services to the UK, France and Germany. In the future, an agreement with
Microsoft Corporation will enable consumers to access their Ofoto picture
albums from their living rooms.
Also integral to the network are retailers offering digital printing serv-
ices, including many of the 50,000 Kodak picture maker kiosks sold
worldwide since the product was launched. The new Kodak film process-
ing station introduced in early 2004 is the only self-service kiosk that lets
consumers develop and print in minutes photo-quality Kodak pictures from
35mm film. This service includes a Kodak picture CD, which serves as a
digital negative of the processed images.
Home printing with the Kodak EasyShare digital camera system pro-
vides a fun and easy way to enjoy and share images through the Kodak
network. And now wireless camera phone users have access to the net-
work through Kodak agreements with major U.S. service providers such as
Verizon and Cingular.
Participants in the Kodak network also include professional photog-
raphers and laboratories that serve customers through Kodak digital work-
flow solutions and components like the new Kodak photo printer 6800.
Enthusiastic acceptance of new Kodak Vision2 500T motion picture
film drove increased sales of color negative origination films for feature
movies, offsetting softness in the TV and advertising segments. A continu-
ing trend toward worldwide releases of blockbuster movies such as
Finding Nemo and Matrix Revolutions led to strong sales of print distribu-
tion films, despite slightly lower industry box office sales compared to
2002. The new Kodak digital cinema pre-show system is currently opera-
tional on more than 200 theater screens nationwide. And services for film
restoration, preservation, mastering and post-production had solid revenue
growth. A key acquisition, Laser-Pacific Media Corp., will help Kodak build
a presence in television post-production services.
Health Imaging
Our Health Imaging business continued to be one of the strongest contrib-
utors to Kodak sales and earnings during 2003.
Digital output such as Kodak DryView film continues to grow. Our
share leadership and Kodak brand strength in traditional x-ray diagnostics
provides a solid launching pad for Kodak’s aggressive expansion into digi-
tal and computed radiography, as well as information solutions such as
picture archiving and communications systems (PACS).
Strong growth in digital applications bolstered the unit’s performance
for the year. Computed (CR) and digital (DR) radiography had solid double-
digit growth. Also delivering a double-digit year-over-year growth was the
increasingly important health services business. Our information systems
business ended the year with strong momentum.
Silver halide x-ray film continues to be the radiologist’s choice for
diagnostic images, especially for applications such as oncology and mam-
mography. Specialty film volumes grew, while overall analog film volumes
were down slightly.
Numerous acquisitions made in 2003 are key to the expansion of our
health markets participation. PracticeWorks strengthens our dental busi-
ness. MiraMedica helps us move forward in computer-aided detection
solutions. FrontPorch DIVArchive Medical Software and Algotec helped
expand our offerings for PACS.
Commercial Imaging
The fourth quarter 2003 realignment distributed Kodak’s commercial
strategic product groups among three businesses: Commercial &
Government Systems, Commercial Printing, and Display and Components.
Overall, revenues from these businesses showed good growth on
increased volumes and favorable foreign exchange.
In Commercial & Government Systems, strong year-over-year growth
was achieved in the unit’s remote sensing systems business, which
includes satellite imaging. Early in 2004, the Company agreed to sell its
Remote Sensing Systems operation to ITT Industries, Inc. Imaging services
to commercial and government customers also showed strong growth.
Kodak high-speed document scanners are the No. 1 seller, and in January
2004 the Company introduced its newest addition, the Kodak i280
scanner.
Our Display and Components businesses are being built from
Kodak’s pioneering work in high-resolution CCD sensors for image capture
and organic light emitting diode (OLED) display for digital output. Kodak’s
sensor business generated strong revenue growth in 2003 versus 2002.
The SK Display Corporation joint venture (JV) between Kodak and Sanyo is
“We made significant progress in assembling the components of the Kodak digital imaging
network, which enables consumers to enjoy their picture experience
anytime, anywhere— at home, on the go and at retail.”
“Our Health Imaging business continued to be one of the strongest contributors to Kodak sales and
earnings during 2003… computed (CR) and digital (DR) radiography had solid double-digit growth.”