Eastman Kodak (NYSE: EK) unveiled a WiFi-enabled digital camera at January's Consumer Electronics Show. The Easyshare One, which can wirelessly send pictures to the Internet, computers, printers, or kiosks, was slated for a June debut. However, the film and camera maker recently announced it would push back the camera's release until October to capitalize on the Christmas shopping season.
While Kodak won't divulge the reason for the delay, it certainly can't be manufacturing issues. Kodak is the market leader in U.S. digital camera sales, and overall revenues from its digital segment -- including cameras, photo-finishing, and home-use photo printing -- rose 42% last year. Though it was not enough to offset the dramatic U.S. market decline in traditional film revenues, which remain Kodak's bread-and-butter, digital products are the company's future.
The difficulty must lie with the wireless technology, where Kodak apparently has less experience. USB connections are a relatively simple interface. WiFi support, on the other hand, requires a network infrastructure that works seamlessly on the camera, computer, and within the photo-capture software installed. You need security measures to prevent unwanted connections whenever the camera enters a wireless-enabled "hotspot." Encryption may also pose a problem. It's all far more complicated than simply plugging a cable into a computer.
Whatever the reason, it must be something of a blow to the company, which views 2005 as the "crossover year" where digital revenues will finally exceed analog revenues, and digital income will increase faster than film income declines.
Kodak reported a first-quarter loss last month that surpassed analyst expectations and even its own guidance. Those results led the company to slate 12,000 to 15,000 employees for layoffs, on top of the 11,000 the company already let go last year. The digital revolution has not been kind to Kodak. It was originally slow in making the transition, but has since embraced the new with gusto. The EasyShare One was an intended centerpiece of its continuing transition.
The eagerly awaited four-megapixel digital camera won several awards at the January electronics show. While releasing the camera into the strongest selling season might ensure healthy sales, the delay no doubt gives the competition an opportunity to catch up. For example, Canon (NYSE: CAJ) supports a new media transfer protocol from Microsoft (Nasdaq: MSFT). It's a wired solution now, but in the near future it may be wireless as well. Nikon's D2H was the first digital SLR to support image transfers to a WiFi-enabled laptop. Further delays by Kodak can only allow more entrants into the market.
With the digital future resulting in lower-than-usual profit margins for Kodak, and obsolescence only a technological innovation away, this camera pioneer needs to execute in new ways and not leave consumers hanging for the next shopping season.
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Fool contributor Rich Duprey does not own any of the stocks mentioned in the article.
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