Kodak Hurt By Weak Digital Camera Sales in Q4

Consumer demand for digital cameras, especially point-and-shoot models, “declined significantly” for Kodak in Q4, CEO Antonio Perez said in an earnings call. That was “a steeper decline than we anticipated or experienced in the prior three quarters,” he said. Digital camera revenue also was hurt by “increased pricing pressures as consumers opted for cameras at the lower price points,” said Chief Financial Officer Antoinette McCorvey.

The company, which continues to transition away from its traditional film business to digital businesses, said quarterly sales in its Consumer Digital Imaging Group (CDIG) tumbled to $731 million from $1.2 billion in Q4 last year. CDIG results include Kodak’s licensing sales. Overall digital revenue fell 25 percent to $1.5 billion, Kodak said. The company, however, continued “to gain traction” with its Pocket Video Cameras, “growing both revenue and market share,” Perez said.

Kodak “continued to focus on profitability rather than chasing volume, and we made progress” in Q4, Perez said. Total Q4 revenue tumbled 25 percent from a year ago to $1.9 billion. Profit fell to $22 million, 8 cents a share, from $443 million, $1.40. Kodak ended the quarter with $1.6 billion in cash and cash equivalents, up from $1.4 billion Sept. 30, it said. The stock fell 18 percent to $3.69.

For all of 2010, Kodak said CDIG revenue grew 5 percent from 2009 to $2.7 billion. Overall digital revenue inched up 1 percent, on an 18 percent increase in Kodak’s “core growth businesses” of consumer and commercial inkjet, packaging solutions and workflow software and services, it said. But overall 2010 revenue fell 6 percent to $7.2 billion. It was “our best digital earnings performance ever, and in line with our segment earnings forecast for the year,” Perez said.

Meanwhile, ITC Chief Administrative Law Judge Paul Luckern rejected a complaint Kodak filed against Apple and Research in Motion (RIM), saying a patent at the heart of the case is “unenforceable,” according to court records. Kodak didn’t prove that claim 15 in the patent, granted in September 2001, was either “literally” infringed or under the doctrine of equivalents. The claim described a method for a digital camera to take a picture while previewing motion images on a display. While the U.S. Patent and Trademark Office found the patent valid, Luckern ruled that prior inventions made it “invalid as obvious.” A final ITC decision is expected by May 23.

Despite the ITC decision, Kodak is “extremely confident” the case “will conclude in Kodak’s favor,” General Counsel Laura Quatela said in a statement. The same Kodak patent was upheld by another ITC administrative law judge in a complaint Kodak filed against LG Electronics and Samsung. LG and Samsung products use the same Kodak technology as those from Apple and RIM, Kodak said. Kodak filed an ITC complaint against Apple and RIM Jan. 14, claiming Apple’s iPhones and RIM’s camera-enabled BlackBerry devices infringed on the Kodak patent. Kodak also has U.S. court actions pending against Apple and RIM in New York and Texas.