Kodak taps Flextronics to make digital cameras

After making its own cameras for 118 years, the Eastman Kodak announced Tuesday it will outsource production of consumer digital still cameras to Singaporean contract manufacturer Flextronics International.

The strategy marks an attempt to improve profitability as Kodak continues its efforts to transform into a digital powerhouse in the world of photography. Those efforts hit a stumbling block in the second quarter as digital camera sales growth slowed, rising only 6% compared to the same time last year, while traditional film sales dropped 22%. The company's revenue in the three months ended June 30 dropped 9% compared to last year and it posted a loss of $282 million.

Kodak shares dove 13.7% to end at $19.20 on the New York Stock Exchange.

As part of the deal with Flextronics, Kodak will farm out the manufacture and certain design and development work of all of its consumer digital still cameras. Kodak will focus on high end digital cameras, in addition to research, it said in a statement. The company expects the change to allow it to bring new products to market more quickly and reduce costs.

Flextronics will acquire two Kodak development centers in the Japanese cities of Chino and Yokohama as part of the deal, as well as production facilities in Shanghai, China. Around 550 Kodak employees will be transferred to Flextronics, Kodak said.

Kodak began marketing its first camera in 1888, a roll-film handheld device pre-loaded with 100 exposures. Once users finished the shots, they had to return their cameras to Rochester to develop the film, make prints and reload, according to Kodak's Web site.

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