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Last Updated: Wednesday, 22 October, 2003, 16:36 GMT 17:36 UK
Kodak investors hold crisis meeting

By Mark Gregory
BBC World Service business reporter

Kodak website image
Which way forward for the iconic photo firm?

Kodak, the world's largest manufacturer of photographic film, is in crisis.

The growing popularity of digital cameras that do not use traditional film has severely dented the market Kodak has dominated for more than a century.

And the company's net profits have slipped to $122m (73m) for the July to September quarter, marking a 63% drop when compared with the same period a year earlier.

In an effort to sort it out, a group of rebel investors who control about a quarter of the company's shares are meeting in New York on Wednesday.

The investors want to find a way to reverse a plunge in the company share price that has been caused by both the falling profits and by concerns about the group's strategy going forward.

Digital limbo

Last month Kodak unveiled plans to invest $3bn to increase its presence in the area of digital technology.

This, the company believes, would counteract a sharp fall in demand for its traditional products in the world's rich countries - that is, in the markets that matter.

But such plans have infuriated some investors whose dividend payments have been cut by 72% to pay for the diversification.

The rebel investors say Kodak is taking too many risks.

Staying put

The investors want Kodak to avoid head to head competition with established electronics giants like Sony, Canon and Hewlett Packard, which have big leads in digital imaging.

They are worried that Kodak will spend too much on buying up other companies to beef up its position in an area its unfamiliar with.

After all, they insist: Film may be in decline, but its still provides Kodak with sizeable profits.

Besides, in some parts of the developing world demand for film is actually rising.

Rebel investors say the company should stick to the business it knows.

But Kodak is mindful of the fate of the instant picture group Polaroid, which went bust two years ago after failing to move with the times.

The group is desperate to avoid a similar fate.

"Our third-quarter results reinforce the rationale behind the strategy we unveiled to our investors on 25 September," said chairman and chief executive Daniel Carp.

After all, history is littered with examples of firms that were performing brilliantly with one type of technology but failed to make the transition to the next.

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