Kodak Launches New Line of Printers, Cheap Ink Cartridges

Eastman Kodak is introducing a line of desktop printers and low cost replacement inks on Tuesday, as the photography company takes on a market dominated by Hewlett-Packard .

For the camera maker, the long awaited launch of inkjet printing products kicks off a year in which it hopes to end the tough and expensive three year transformation that has seen the company shed tens of thousands of workers.

Kodak said it will in March start sales of 3 EasyShare All-in-One printers, ranging from $150 to $300, which will print, scan and copy document and photos. Black replacement ink cartridges will sell for about $10, and a color one for about $15, about 50 percent less than its rivals, Kodak said, adding that it will profit on sales of both printers and ink.

Kodak said this strategy is meant to disrupt the market dominated by HP, Canon and Lexmark, where inexpensive printers are sold at a loss, and profits are earned over the long term in sales of replacement ink cartridges.

In that model, consumers purchasing ink unknowingly also buy expensive brand-specific technology that is built into each cartridge, Kodak says. "You are throwing that (technology) away and buying a new one every time you buy one of their cartridges, which is pretty expensive stuff, said Cheryl Pohlman, a marketing director at Kodak. "With our system we have put that print head right into the printer... so all you have to buy is ink."

She notes that the products close a loop, of sorts, for Kodak, such that customers can now use Kodak services to print in any of the three most common ways: online, at one-stop-shopping machines at retail stores, or at home.

"What we want to do is give people who want to print at home a choice," she said in interview with Reuters. "We believe that this is a profitable business model for Kodak and that for a consumer it is freeing the way they can print at home."

The unveiling comes just two days before Kodak meets in New York with institutional investors, who are certain to ask tough questions about whether the shift away from Kodak's dependence
of traditional film -- a declining market -- and toward digital products and services is soon to pay off.

There are positive signs: last week Kodak reported a fourth quarter profit, versus a loss in the previous year. Still, much of that profit was driven by royalties from licensing of patents and technology, and overshadowed a 25% decline in digital camera and related accessories.

Analysts, who had been told since late 2003 to look for an inkjet strategy from the Rochester, New York-based company, are already skeptical about how Kodak will be able to compete with companies who have millions of printers sitting alongside personal computers owned by families and small businesses.

"We remain concerned that the upfront costs of establishing an installed base will be high, and that the mature and competitive nature of consumer inkjet requires considerable research and development and (operating cost) commitments," said analyst Shannon Cross of Cross Research, in a client note published in anticipation of the inkjet launch.

The printers are set to sell at Best Buy stores exclusively at first, and should be more widely available by the winter holiday season, Kodak said.