Kodak 2006 Annual Report Download - page 12

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ITEM 1. BUSINESS
Eastman Kodak Company (the Company or Kodak) is the world’s foremost imaging innovator, providing leading products and services to the photo-
graphic, graphic communications and healthcare markets. With sales of $13.3 billion in 2006, the Company is committed to a digitally oriented growth
strategy focused on helping people better use meaningful images and information in their life and work. Consumers use Kodak’s system of digital and
traditional image capture products and services to take, print, store and share their pictures anytime, anywhere; businesses effectively communicate
with customers worldwide using Kodak solutions for prepress, conventional and digital printing and document imaging; creative professionals rely on
Kodak technology to uniquely tell their story through moving or still images; and leading healthcare organizations rely on Kodak’s innovative products,
services and customized workflow solutions to help improve patient care and maximize efficiency and information sharing within and across their
enterprises.
In 2003, the Company announced a comprehensive strategy to be implemented through 2007 to complete its transformation as the leader of the tradi-
tional photographic industry to a leadership position in digital imaging markets. Solid progress was achieved during 2006 in each area of this strategy.
The Company holds a leading position in key digital product categories where it participates. For the year ended December 31, 2006, the Company
achieved a level of digital revenues that exceeded traditional revenues. Additionally, through the 2005 acquisitions of KPG and Creo, the Company has
essentially completed its $3 billion investment and acquisition plan included in the 2003 strategy.
For 2007, the Company’s strategy is to continue to focus on the following metrics:
• Net cash generation
• Earnings growth from digital products and services
• Revenue growth from digital products and services
In addition the Company’s priorities for 2007 also include:
• Achieve market success with new products, including consumer inkjet and CMOS, and Graphic Communications Group (GCG) product line
extensions and new market opportunities within GCG
• Continue progress toward the installation of our target cost model, including the focus on selling, general, and administrative (SG&A)
expenses, and completion of the traditional restructuring
Reportable Segments
As of and for the year ended December 31, 2006, the Company reported financial information for four reportable segments: Consumer Digital Imag-
ing Group (CDG), Film and Photofinishing Systems Group (FPG), Graphic Communications Group (GCG) and Health Group (KHG). The balance of the
Company’s operations, which individually and in the aggregate do not meet the criteria of a reportable segment, are reported in All Other.
The following business discussion is based on the four reportable segments and All Other as they were structured as of and for the year ended
December 31, 2006. The Company’s sales, earnings and assets by reportable segment for these four reportable segments and All Other for the past
three years are shown in Note 23, “Segment Information.”
Consumer Digital Imaging Group (CDG) Segment
Sales from continuing operations of the CDG segment for 2006, 2005 and 2004 were (in millions) $2,920, $3,215 and $2,366, respectively.
The Company is a global leader in providing digital photography products and services for consumer markets. Kodak holds top three market shares in
the major markets it participates in such as digital still cameras, snapshot printers, retail photo kiosks, and online imaging services.
CDG’s mission is to enhance people’s lives and social interactions through the capabilities of digital imaging technology, combined with Kodak’s unique
consumer knowledge, brand and intellectual property. This focus has led to a full range of product and service offerings to the consumer. CDG’s strat-
egy is to extend picture taking, picture search/organizing, creativity, sharing and printing to bring innovative new experiences to consumers – in ways
that extend Kodak’s legendary heritage in ease of use.
Digital Products: Consumer digital products include digital cameras, home imaging accessory products, and self-contained home printers and printer
media. This product line fuels Kodak’s participation in the high revenue growth personal device and home accessory digital markets. Products are sold
directly to retailers or distributors, and are also available to customers through the Internet at the Kodak store (www.kodak.com.). Kodak’s full line of
camera products and accessories enable the consumer to personalize their digital camera and their photographic experience. In January 2007 Kodak
introduced a new line of Digital Picture Frames that play customizable slideshows of pictures and videos that can be set to music.
Retail Printing: In January 2007, the Retail Printing Group was redefined to manage Kodak’s complete set of digital printing hardware, media and
infrastructure offerings to retailers. This consolidation will enable a complete set of resources to be applied to bringing innovative service products