Kodak 2005 Annual Report Download - page 13

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decision on the vendor. Additionally, the government-funded hospitals’ budgets tend to be limited and restricted. Government reimbursement policies
often drive the use of particular types of equipment and infl uence the transition from analog to digital imaging. These policies vary widely among
European countries. In Asia and Japan, sales of all products are split between distributors and end users. In Europe, Asia and Japan, consumables
and analog equipment are often sold as part of a media/equipment bundle. Digital equipment and solutions are sold direct to end-users and through
OEMs in these three geographic areas.
Worldwide, the medical imaging market is crowded with a range of strong competitors. To compete aggressively, Kodak’s Health Group segment
has developed a full portfolio of value-adding products and services. Some competitors offer digital solutions similar to those of Kodak, and other
competitors offer similar analog solutions or a mix of analog and digital. The Health Group segment has a wide range of solutions from analog to
digital as well as solutions combining both analog and digital technologies. Moreover, the segment’s portfolio is expanding into new areas, including
enterprise information management solutions, thus enabling the segment to offer solutions that combine medical images and information, such as
patient reports, into one unifi ed package for medical practitioners. Kodak will continue to innovate products and services to meet the changing needs
and preferences of the marketplace.
Graphic Communications Group
Sales from continuing operations of the Graphic Communications Group segment for 2005, 2004 and 2003 were (in millions) $2,990, $1,343 and
$967, respectively.
The Graphic Communications Group segment serves a variety of customers in the creative, in-plant, data center, commercial printing, packaging,
newspaper and digital service bureau market segments with a range of software, media and hardware products that provide customers with a variety
of solutions for prepress equipment, workfl ow software, digital and traditional printing, document scanning and multi-vendor IT services. As of and
for the year ended December 31, 2005, the Graphic Communications Group segment consists of subsidiaries Kodak Polychrome Graphics LLC (KPG),
Creo Inc., NexPress Solutions, Kodak Versamark, Inc., and Encad, Inc. Products include high-speed, high-volume continuous inkjet printing systems,
high-speed production document scanners, micrographic peripherals, digital on-demand color and monochrome printing equipment, wide-format
inkjet printers, inks, media (including micrographic fi lms) and services. The Company also provides maintenance and professional services for Kodak
and other manufacturers’ products, as well as providing imaging services to customers.
In January 2004, Kodak acquired Scitex Digital Printing, renamed Kodak Versamark. This entity is a wholly owned subsidiary of Kodak focused on
high-speed, high-volume printing applications, including those in transaction and industrial market segments. Kodak Versamark provides a full set of
high-speed, variable-data inkjet printers, inks, service and other consumables.
In May 2004, Kodak acquired Heidelberger Druckmaschinen AG’s (Heidelberg) 50 percent interest in NexPress Solutions LLC, a 50/50 joint venture
of Kodak and Heidelberg that makes high-end, on-demand digital color printing systems, and the equity of Heidelberg Digital LLC, a leading maker
of digital black-and-white variable-data printing systems. Kodak also acquired NexPress GmbH, a German subsidiary of Heidelberg that provides
engineering and development support, and certain inventory, assets, and employees of Heidelberg’s regional operations or market centers.
On April 1, 2005, the Company became the sole owner of KPG through the redemption of Sun Chemical Corporation’s 50 percent interest in the KPG
joint venture. This transaction further established the Company as a leader in the graphic communications industry and complements the Company’s
existing business in this market.
On June 15, 2005, the Company completed the acquisition of Creo Inc. (Creo), a premier supplier of prepress and workfl ow systems used by
commercial printers around the world. The acquisition of Creo uniquely positions the Company to be the preferred partner for its customers, helping
them improve effi ciency, expand their offerings and grow their businesses.
Marketing and Competition: Throughout the world, graphic communications products are sold primarily through a variety of direct and indirect
channels. The end users of these products include businesses in the commercial printing, data center, in-plant and digital service provider market
segments. While there is price competition, the Company has been able to maintain price by adding more attractive features to its products through
technological advances. The Company has developed a wide-range portfolio of digital products to meet the needs of customers who are interested in
converting from traditional analog technology to new enterprise digital workfl ow solutions. Maintenance and professional services for Kodak products
are sold either through the product distribution channel or directly to the end users of equipment.
The growth in digital printing workfl ows has negatively affected the sale of traditional graphic fi lms. As a result, the Company has become more
active in digital printing products and services in order to participate in this growth segment through the acquisitions of Scitex Digital Printing,
renamed Kodak Versamark, the NexPress-related entities, KPG and Creo. Traditional graphic products, primarily consisting of graphic fi lms and
chemistry, were formerly sold directly by the Company to the KPG joint venture.
Inkjet products are sold primarily through a two-tiered distribution channel. The Company remains competitive by focusing on developing new ink and
media formulations, new printer technologies, new software and training enhancements.