Kodak has today announced it is acquiring Ofoto. Kodak, obviously realising that a large chunk of their future is reliant on consumer digital imaging has today signed a "definitive agreement" to buy the online photofinishing giant Ofoto. "The acquisition enhances our leadership in the growing market for online photo services. By combining Kodak's and Ofoto's technology, marketing and distribution assets, we will be able to deliver the most comprehensive, easy-to-use online photography services to customers and consumers,'' said Shih. "This will accelerate Kodak's growth and drive more rapid adoption of online photography.''

Shutterfly Comment

UPDATE: Shortly after posting this article we received an email from Shutterfly, here's what their CEO, Andy Wood has to say on this acquisition:

"Kodak has been shopping around so this announcement comes as no surprise. Early on, Shutterfly invested in a highly scalable infrastructure to provide in-house image storage and accommodate projected print volumes over the next few years. Today that's what it takes to be successful in the online photo space and Ofoto would have had to invest a lot of money to get there.

We made a deliberate choice at our founding to build a sustainable business and are fortunate to have achieved leadership in this market. We are focusing on growing our business-and the industry -- and we expect to be profitable within the next year."

Kodak to Acquire Leading Online Photo Service Ofoto

ROCHESTER, N.Y.--(BUSINESS WIRE)--April 30, 2001--Eastman Kodak Company announced it has signed a definitive agreement to acquire Emeryville, Calif.- based, Ofoto, Inc. (www.ofoto.com), a leading online photography service. Ofoto will operate as a wholly owned subsidiary of Kodak and will be led by its existing management team, which will report to Willy Shih, president of Kodak's Digital and Applied Imaging unit.

Ofoto will serve as a critical connection between Kodak's film scanning and uploading services and Kodak's output capabilities through labs operated by its Qualex Inc. subsidiary. These capabilities will give customers and consumers unlimited flexibility in storing, sharing, enhancing and printing pictures.

Founded in 1999, Ofoto has 1.2 million registered members. The company offers digital processing of digital images and traditional film, top-quality prints, private online image storage, sharing, editing and creative tools, frames, cards and other merchandise. Ofoto employs 121 people, all based in Emeryville. In a recent report on online photo sharing and photofinishing, ARS, Inc., a business-to-business market intelligence company, ranked Ofoto as the leading online service. Ofoto led in three of the four categories: Ease of Use, Service and Price Competitiveness.

"The acquisition enhances our leadership in the growing market for online photo services. By combining Kodak's and Ofoto's technology, marketing and distribution assets, we will be able to deliver the most comprehensive, easy-to-use online photography services to customers and consumers,'' said Shih. "This will accelerate Kodak's growth and drive more rapid adoption of online photography.''

This move will result in greater speed to market for new features and reinforce Kodak's position as the market leader.

Financial terms were not disclosed.

"Kodak gives us the resources we need to grow Ofoto beyond where it is today and make online photography a mass-market service,'' said James Joaquin, CEO of Ofoto. "We believe that this acquisition enables us to deliver a more complete service.''

Ofoto, together with Kodak's PictureVision subsidiary and kodak.com, will be the cornerstone of Kodak's Internet imaging infrastructure and service offerings. These assets are part of a complete online photography experience--from capture devices and film scanning and storage infrastructure to online services and output media.

Kodak will drive market growth by integrating Ofoto's Web site, infrastructure, e-commerce capabilities and quality digital printing expertise with Kodak's film-scanning infrastructure and network services and Qualex's output capabilities. The company's Web-based applications featured on kodak.com and its established distribution channels will bring more innovative services to the market.

"We anticipate bringing Ofoto's capabilities to our retail customers as soon as possible through the Kodak Picture Center online initiative,'' said Daniel Palumbo, president, Consumer Imaging, and senior vice president, Eastman Kodak Company. "Combining Ofoto's capabilities with the existing service will provide our retail customers with even richer features and more ways to generate revenue.''

According to a report by Nielsen / Net Ratings, Kodak's current Web offerings--kodak.com, Kodak PhotoNet Online, the Kodak Picture Center online at CVS.com and the Kodak-sponsored "You've Got PicturesSM'' service offered on America Online--averaged more than 782,000 unique visitors per month for the first quarter of 2001. This makes Kodak's offerings the most highly trafficked photography sites on the Web.

The completion of the acquisition is subject to regulatory approval and customary closing conditions. Kodak anticipates that the acquisition will be slightly dilutive this year.

Kodak and infoimaging

The acquisition of Ofoto will help drive the growth of two key infoimaging categories--infrastructure and services / media. Infoimaging is a $225 billion industry created by the accelerated convergence of image science and information technology. Infoimaging unites three closely related imaging markets--devices, infrastructure and services / media--enabling consumers and businesses to more easily use images as a fast and effective way to communicate. Infoimaging presents significant new revenue opportunities for any company that delivers value through the marriage of information and images.