Aug. 5 (Bloomberg) -- Eastman Kodak Co.'s share of the U.S. digital camera market grew in the second quarter as it sold more cameras with printer docks while former leader Sony Corp. slipped to No. 3, an IDC researcher said.

Kodak, the world's largest photography company, remained the leading U.S. supplier and packaged a picture printer with one in four cameras sold, IDC analyst Christopher Chute said today. A Kodak executive confirmed the increase in such bundled sales, which may ensure a market for Kodak paper and ink strips.

Growth in digital camera sales by all makers, including rivals Canon Inc. and Sony Corp., slowed to 20 percent in the first half from 50 percent a year earlier, Chute said. Slowing digital sales may complicate the strategy pursued by Kodak Chief Executive Antonio Perez, 59, who is shifting the company to those products as film and conventional camera sales decline.

``They're all using promotions and Canon has been putting emphasis on the distribution strategy, which costs a lot of money on marketing and positioning,'' Chute said in an interview. ``Kodak did well. They've held their top position for three quarters.''

Cooling Demand

Digital camera demand has begun to cool as the market matures: IDC forecasts U.S. sales will rise 16 percent this year to 27 million units; in 2004, sales rose 36 percent. Rochester, New York-based Kodak surged to the top of the U.S. market at the end of 2004, overtaking Sony in the fourth quarter, and rising to 21.7 percent of the market for the year.

Kodak extended its lead in the second quarter, to 23.8 percent from 18.3 percent in the year-ago period, and to 22.1 percent for the first half of 2005, up from 18.2 percent a year earlier. Sony's share fell to 18.3 percent for the 2005 first- half from 21.4 percent in the 2004 first half.

Canon, the world market leader last year, rose to second in the U.S. with a 20.6 percent share in the first half this year, up from 14.7 percent in the first half of 2004, IDC said. Olympus Corp., though fourth with 8.4 percent, had an 11.7 percent share in the 2004 first half, IDC said.

U.S. camera shipments rose to 9.7 million units through June, up from 8.1 million in the 2004 first half, Chute said. IDC is a unit of Boston-based International Data Group Inc.

One in four of the cameras Kodak sold in the second quarter came packaged with one of its picture docks, Chute said. Such bundled sales lock consumers into Kodak paper and thermal ink strips for printing, where the company makes its profits.

Selling `a Solution'

``They offered a solution, rather than a product,'' Chute said. ``The printer dock is really crucial to their position and their strategy. It's quite brilliant when you think about it, which is why you'll see others coming in with similar products.''

Selling packages has been something that Kodak has increased this year and will continue to build on, said Mary Hadley, who heads Kodak's digital camera products.

``We're very happy with our bundled sales,'' said Hadley. ``Many consumers now are late-adopters and they care a lot about ease of use and making prints. Bundles are good for us and for them. The early adopters liked the technology.''

Kodak shares fell 42 cents to $25.74 in New York Stock Exchange composite trading. Kodak has fallen 20 percent this year.

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

Last Updated: August 5, 2005 17:34 EDT