Consumer Digital Imaging Group sales totaled $778 million,down 14%, largely reflecting expected declines in digital capture revenue as a result of the company's strategy to reduce its digital camera portfolio in the low-end price range, decreases in photofinishing services at retail, and an industry-wide decline in snapshot printing. This was partially offset by growth in kiosks and related media, imaging sensors and royalty revenues. Loss from operations for the segment was $114 million, compared with a year-ago loss of $167 million,driven by significantly lower SG&A expenses, partially offset by higher silver costs. Highlights for the quarter included a 23% sales increase in the KODAK Gallery and a 13% increase in sales of KODAK PICTURE kiosks and related media. Additionally, Kodak remains in the top three in digital camera market share in the U.S. and worldwide. The company also introduced its new inkjet printer line during the first quarter and began shipment to retailers in March.
And from CEO Antonio Perez's comments:
On the Consumer Digital side, I am extremely pleased with the reception of our new line of consumer inkjet printers. We are selling everything we can make – which reflects both strong demand and the usual realities of ramping up production. It’s clear that our targeted customers really understand the value of Kodak quality, ease of use, and ink for as little as half the cost. Best Buy has proven to be a very effective launch partner. We are now adding other channel partners to our distribution network and are moving into additional geographies. To date, we have announced deals with MediaMarkt and Dixons in Europe and soon we will be announcing deals with other major retailers in the US. We are very happy with the retailers’ response to this new business model that clearly benefits consumers and will continue to make new retail announcements as we get closer to each introduction. Our goal continues to be to sell at least 500,000 units in 2007. Given the enthusiastic response, we plan to increase our 2007 inkjet investment by as much as $50 million in order to accelerate our ramp up, boost new product development, and position ourselves to better supply current and future demand. Let me tell you, this was the easiest and happiest decision that I had to make this quarter.
I give Perez credit with his comments, for staying on strategy with the new inkjet printer positioning message and being honest about an early ramp's mix of supply and demand factors. (I've read elsewhere that lack of product in the channel, ie BestBuy, must be wholly the result of intense demand.)