Dec. 25 (Bloomberg) -- Eastman Kodak Co. probably generated increased holiday sales of digital cameras and printers, boosting efforts by the world's largest photography company to shift from its traditional film business.

``This will be a great year for Kodak in digital,'' said Christopher Chute, senior analyst at market-research firm IDC. ``They have a pretty simple strategy: `Pictures are forever, and we're all about pictures.' They sell simplicity.''

Chief Executive Officer Antonio Perez needed to stoke holiday sales to reverse four straight quarterly losses and halt a slide in shares. The fourth quarter is Kodak's biggest. Sales of digital products surpassed film for the first time last quarter, helped by demand for the company's EasyShare camera printer.

Kodak's share of U.S. digital camera sales has grown to a market-leading 22 percent since it entered the business in 1995, according to Framingham, Massachusetts-based IDC. The company controls more than 50 percent of the market for snapshot printers, according to Robert Palmer of InfoTrends/CAP Ventures, a Weymouth, Massachusetts-based market research company.

``We'll likely sell more Kodak cameras than any other,'' said David Figler, vice president of technology merchandising for Staples Inc., the world's largest office-supply retailer.

Shares of Rochester, New York-based Kodak, which have plunged 28 percent this year, fell 16 cents to $23.09 on Dec. 23 in New York Stock Exchange composite trading. The shares traded as high as $93 in February 1997.

`Seeding the Market'

The Consumer Electronics Association expects digital-camera sales to increase 29 percent this year. Only MP3 players, led by Apple Computer Inc.'s iPod, and high-definition and large-screen televisions are expected to do better.

``It's been a great holiday season,'' said Jeff Joseph, spokesman for the Arlington, Virginia-based association. ``From our surveys, the products we predicted to be hot have been hot.''

Many retailers are putting together packages of cameras, docks and printers from different companies such as Hewlett- Packard Co. and Canon, Palmer said. That gives Kodak an advantage because the company bundles its own products and ``there's still a strong preference for same-brand combinations,'' he said.

By selling more cameras and printers, Kodak is ``seeding the market with hardware to get the recurring revenue of paper and ink,'' said Ed Lee, who covers cameras for InfoTrends.

Trimming Inventory

Kodak, which invented the Brownie camera in 1900, derives much of its profit on high-margin products like packages of paper and dye strips for its own printers.

The company had an unexpected loss of $12 million in the year-earlier fourth quarter because of costs to cut jobs and close plants.

``Our general sense from the tone of retailers is that digital cameras are selling well and the bundles are doing even better,'' said Tim Bueneman, head of institutional sales at Seattle-based brokerage firm McAdams Wright Ragen Inc. ``My Kodak bundle was stolen from my office. It was on my desk and it's gone.''

Staples benefits from sales of camera-printer bundles because it ``forces the issue of printing at home,'' said Figler of Framingham, Massachusetts-based Staples. ``What we're about is papers and inks.''

Kodak cameras may be harder to find this holiday season after the company cut production by 20 percent to 1.6 million units for the fourth quarter.

``We are not planning to lose share for the quarter,'' Perez said on an Oct. 19 earnings conference call. ``We are just planning not to have inventory we don't need.'' Kodak said Oct. 19 that it planned to reduce its inventory of consumer products in the fourth quarter by about 500 million.

The company had an unexpected loss of $12 million in the year-earlier fourth quarter because of costs to cut jobs and close plants.

Perez declined to be interviewed for this story, said Kodak spokesman David Lanzillo.

Focus on Digital

Perez's strategy might hurt the company in the long run, said InfoTrends's Ed Lee.

``If customers are looking to buy and Kodak isn't available, they'll buy somebody else's camera,'' he said. ``And they'll be out of the market for two or three years.''

Perez, 60, took over Kodak June 1, succeeding Daniel Carp, who initiated the shift to digital products in 2003. The company surpassed Sony Corp. as the top digital-camera seller in the U.S. in 2004.

Perez is struggling to make the transition to digital as film sales plunge faster than expected. Consumer film sales tumbled 30 percent in the third quarter. The company posted a record quarterly loss of $1.03 billion after writing down the value of tax benefits it can't presently use after four straight quarterly losses. Camera sales rose 20 percent.

``Kodak is doing the best it can under the circumstances,'' IDC's Chute said. ``They've been successful with their digital products.''

Happy Customers

Kodak's share of the global digital-camera market probably increased to 14 percent this year from 11 percent in 2004, according to InfoTrends. Kodak ranks third behind Canon Inc. and Sony Corp.

Kodak leads in consumer satisfaction for cameras costing less than $400, according to an Aug. 16 survey by J.D. Power & Associates. The company has cameras ranging up to the EasyShare- One Wi-Fi at $599.99.

``Kodak is especially strong in the sub-$200 price category with their C series cameras,'' said Staples' Figler. ``Kodak also plays very strongly in the 10X optical zoom cameras in the $200- to-$400 range with their Z-series.''

Sales, which rose 3 percent, are expected to climb 11 percent this quarter to $4.19 billion, according to the average estimates of five analysts surveyed by Thomson Financial.

The company is expected to have profit of $130.6 million, or 39 cents a share, according to the average estimate of six analysts in the Thomson survey. Thomson declined to provide an analyst to say what was included and excluded in its average estimate.

To contact the reporter on this story: Subrata N. Chakravarty in New York at schakravarty@bloomberg.net.

Last Updated: December 25, 2005 08:11 EST