"The completion of these financings and conversions puts PhotoChannel in a strong working capital position with no debt. The last advance of the Choices Entertainment Corporation and subsequent debenture conversions, readies PhotoChannel to initiate its business plan of printing from digital images with next day home delivery all at prices competitive to traditional film processing without the cost of film."

"Our relationship with InfoSpace is very important. Ofoto's mission from the very beginning has been to bring the quality and convenience of online photography to everyone. Our partnership with InfoSpace means our service will be integrated and offered as part of their leading platform that powers services offered to consumers and merchants through their extensive affiliate network of wireless carriers, merchants and Web sites."

"The Casio QV-3000EX is a camera which performs beyond your expectations of it, it's big on features, big on lens and image quality and offers excellent bang for the buck. If you're in the US then the Microdrive bundle probably offers the best value 3 megapixel digital camera kit on the market. The designers could have spent a little longer tidying it up, the case could have been smaller and made of a better quality material but then Casio wouldn't have been able to bring it in at such a low price point. The key here is that the message appears to be getting through "good image quality starts with good quality lenses"."

"(The presentation opens with the screening of the movie trailer for "Mission Impossible 2.")

Dan: Good afternoon! I was just handed a note from the Lyra people . . .

"Good afternoon, Dan. Your mission, should you accept it, is to detain a large audience of digital photo industry operatives from immediately advancing to their single-minded goal.....the post-conference cocktail hour. As always, should you get trampled in the stampede, Lyra will disavow any knowledge of the accident. This message will self destruct in five seconds. Of course, it would have lasted much longer, had it been printed on Kodak paper."

Kidding aside, I hope you enjoyed that preview of the new Mission Impossible sequel, coming to theaters next month. We are very excited about it -- not only because it will feature our Kodak DC 290 digital cameras in several scenes -- but because the plot revolves around a Kodak digital memory card that people smuggle, chase down, and even shoot at each other for. Talk about brand loyalty!

Steve Case at AOL once told me that his best salespeople were Tom Hanks and Meg Ryan, thanks to their hit movie, "You've Got Mail." We think Tom Cruise can do the same thing for our industry with "Mission Impossible 2" -- which we are trying to convince Paramount Studios to re-title, "You've Got Pictures....taken with a 2.1 Megapixel Kodak Digital Camera." Hey, we can dream, can't we?

It's encouraging to see that more and more people are getting the digital photography "bug" these days....people such as computer buffs, real estate agents, photo journalists and, of course, international espionage agents. And that's great. But what about consumers....the mass market?

Frankly, that's who we have been aiming for. Not just the early adopters, not just the photo hobbyists, not just the computer and technology enthusiasts. They're already on board. And the business-to-business part of our market is on board with digital, too: This includes a good number of professional photographers, along with our health imaging and document imaging customers.

But we won't be happy until the mass consumer market signs up for digital, in much larger numbers than today. Because the big consumer market is Kodak's sweet spot. We have a long-term relationship with consumers that's unparalleled and unrivaled.

That's why we began building a consumer digital infrastructure, way back when digital was barely a blip on the radar screen.

First, we went after digital capture. Five years ago, who would have predicted that Kodak would have the number two brand of digital cameras in the U.S., and be among the top three brands in the world? Today, we are.

Next, we built the backbone for scanning and storing pictures. Today, we can convert four million images a day into digital files. We've got the largest scanning capacity in the world.

Third, we built an online photo community, Kodak.com, which receives somewhere in the neighborhood of three million hits per day.

And, fourth, we ramped up the output side. Our Qualex subsidiary routinely prints 40 million images per day, more than enough capacity to handle the digital print orders that people will send through our soon-to-be-launched online service, Print-at-Kodak...while providing print fulfillment for other dot-com photo businesses.

In short, we built the preeminent digital photography infrastructure. And, in retrospect, I guess you might say our philosophy was, "If we build it, they will come."

Well, consumers are coming over to digital. But you can't fault anyone in this industry for wondering, "Can't they get here a little faster?"

Looking ahead to 2005, we see U.S. sales of digital cameras climbing to seven or eight million per year. That's certainly respectable, but not great. Especially when you consider that some 18 million conventional cameras and more than 130 million one-time- use film cameras will also likely be purchased that same year.

So, in the next few minutes, I'd like to briefly suggest some fundamental reasons why digital photography isn't making faster inroads with the general photo market . . . and also suggest what we as an industry can do about it.

I have to be careful, because my first suggestion might get me in some trouble with the rest of the industry. I might even get branded a heretic. So I'll say it softly: "Digital" may not be a magic word for consumers. I'll say it again: "Digital" may not be a magic word for consumers.

Now, don't get me wrong. I grant you that the word "digital" still holds powerful magic for people in our industry. Heck, it's got the attention of people in every industry.

If you look at all the instant wealth that has been created in the past few years, it doesn't take a genius to figure out that "digital" is where the action is.

But is the mere mention of "digital" a hot button for someone who just wants to take some pictures of the family gathered together for Mother's Day brunch this weekend? Some in our industry apparently believe so.

I found this ad in a New York newspaper. "Are you digital yet?" Implying that the reader already understands WHY he or she should switch to digital: it's just a matter of when. But if you're still not sure what makes a digital camera so special, the rest of the ad provides the answers:

Not only does this camera have selectable ISO, a digital tele-converter and a high speed USB interface, it is fully compatible with Type 1 and Type 2 Compact Flash memory cards. Plus, it has an AE lock and is equipped for both RS-232C and NTSC video out.

Talk about compelling consumer benefits! It makes you wonder how we ever got through Mother's Day in the past, without that USB interface and AE lock!

Now, I'm not picking on this particular retailer or camera manufacturer. We've all been guilty, at times, of trying to sell the features we've engineered, instead of the benefits consumers value.

We know very well what "digital" means to us . . . and to industry analysts . . . and to Wall Street. But what does "digital" really mean to the public? How about a quick reality check...

To consumers, the word "digital" does not automatically mean "better." Quick example: expensive fashion wristwatches are always analog. Cheap disposable watches are almost always digital. Here's another example: digital books and digital newspapers are still regarded as poor substitutes for their hard copy counterparts.

Furthermore, "digital" does not necessarily mean "more reliable." Computers are the very essence of a digital product -- and no product in the consumer marketplace is more prone to crashes and freezes. Come to think of it, what other household appliance requires you to protect it from catching a virus?

If we asked consumers, they might beg us to keep the computer engineers as far away from their cameras as possible. In their minds, once the computer people take over the photo industry, we'll have cameras that take five minutes to boot up....that sporadically erase or lose your pictures for no apparent reason....and that bombard you with annoying banner ads every time you look through the viewfinder!

So, "digital" may not mean as much to consumers as we had hoped. And the corollary to this observation is the interesting fact that the really successful and widely accepted digital products are not commonly regarded as... "digital." Think about it. People don't talk about their "digital CD collection." A CD is just a CD. Same with your automatic garage door opener. If yours was manufactured in the last few years, it operates with four microprocessors -- it's fully digital. But does anyone think about or refer to their door opener as a digital device? Maybe the companies that make 'em.

You have to conclude that consumers are simply not as obsessed with digital technology as are the industry leaders and pundits. As a matter of fact, we know from recent history that new photo products do not have to be digital to be trendy or cool. The number one, top selling camera in the U.S. this past holiday season features technology that's a good fifty years old: Polaroid's I-Zone pocket camera.

I'll bet that if you go to any public school here in Boston, you will find the insides of the student lockers plastered with the tiny instant sticker photos that kids have been taking with this camera.

By the way, there is such a resurgence of interest in picture-taking among teens, that Kodak is inviting kids, via the Web, to help design a new line of camera fashion accessories for our one-time-use film cameras. Don't forget, this is Generation Y, the generation that was born into a digital world. And yet, from all appearances they care much more about the amount of fun they can have with a camera, rather than the number of megapixels that come inside it.

Now, please don't get me wrong. I'm not saying that the future of digital photography is cloudy.

The picture business is transitioning to digital, and we have been helping consumers get comfortable with that transition through our film digitization initiatives, such as Kodak Picture CD and "You've Got Pictures" via America Online.

But it's not going to be a slam-dunk. Consumers will not abandon a product or service they are happy with, unless there is a compelling reason to do so. But they can be persuaded to switch -- if they are offered a something new that is demonstrably better, faster, cheaper or easier to use.

The burden of proof is on us. Especially since we are asking people to learn a whole new system for taking their pictures, for sharing their pictures, for storing their pictures and for getting their prints.

But this is hardly a new challenge for the photo industry. And certainly not for Kodak. Because we introduced an entirely new photography system to the mass market once before, with enormously successful results.

The episode I'm thinking of took place at the beginning of the 20th century, but the circumstances were remarkably similar to those we face today.

George Eastman had pioneered a practical way to capture images using roll film, instead of the more conventional and widely used glass plates. Because film processing was too complicated for the average customer, Eastman also devised a new system for photo finishing. After shooting a roll of film, people would upload -- via U.S. mail -- the unopened camera to Kodak. In a short time, their prints and their camera loaded with fresh film would arrive in their mailbox: "You've Got Pictures!"

George Eastman's new technology was far more economical and convenient than anything that preceded it. All he lacked was....a market! A mass market for this new system of picture taking simply did not exist. So it was up to him to create one.

If Eastman were a product of the Internet era, he might have been tempted to sell his system as a glamorous piece of new technology, with lots of ads and press releases hyping the wonders of "nitrocellulose roll film photography."

Of course, he didn't. Instead, he helped people envision how picture taking would enrich their lives. He showed people how simple and how much fun it is to take pictures. He suggested when and where to take pictures. He provided guidance on who should take pictures. He left no doubt about the modest cost of taking pictures. And, most important of all, he gave people plenty of sound reasons why they should take more pictures.

In short, he did all of the things we ought to be doing today. And if all of this sounds a bit simplistic, keep in mind the one lesson that 100 years of consumer marketing should have taught us: In the picture business, simple trumps megapixels, every time.

There is one more noteworthy parallel between the great photography revolutions of this century and the last. In 1900, the first breakthrough in selling roll film cameras to a mass market took place with the introduction of a toy camera for children, the Kodak Brownie.

It only cost one dollar, it came in a colorful, fun package, and it was simple enough for the youngest child to use. It was also the first camera in history to sell more than a quarter million units in its first year on the market.

Here we are, one hundred years later, and today's best digital photography play . . . is the digital photography playthings -- the toy cameras!

I'd like to show you a product that industry analysts say was one of last year's best selling digital cameras.

This is the Barbie Photo Designer, one of the really hot toys of 1999. Now, you have to ask yourself, what does Barbie know about selling cameras that the rest of us don't? Would we all do better by putting pink flower petals around the lenses of our digital cameras? Maybe not. But try to put yourself in Barbie's shoes for a moment -- yes, I know that's a painful thought -- and you'll begin to see why a hot pink daisy on a camera makes so much sense.

You see, in Barbie's world, a digital camera is not a piece of high tech hardware. It's a fashion accessory. It's a way to have more fun with your friends. And, above all, it's a portal to Barbie's world of glamour.

I guarantee you that the advertising for this product makes no mention of megapixels or AE locks. Language like that does not capture the imagination. Here are some of the phrases that do appear in Mattel's ads for this camera: "See yourself in Barbie's world."; "Design scrapbooks and photo albums, even mini-movies."; "Print out lasting souvenirs of every Barbie photography adventure."; And my personal favorite: "A real film-free color camera!". Now, ask yourself, is any marketer of serious cameras explaining the benefits of digital photography to the public this clearly?

This year, you can expect to see an even greater flood of digital cameras appearing on toy store shelves. If Barbie is a little too tame for your youngsters, you can pick them up a "WWF SlamCam," so they can put themselves in the picture with their favorite pro wrestling stars....Can anybody spell "role model?"

But that's not all. For young cable TV fans, the folks at Nickelodeon are offering "Nick Click," which they are advertising as the world's zaniest digital camera. Internet-savvy kids will soon be bugging their parents for the new "Yahoo! Cam" and the $79 "Jam Cam." Even Nintendo has joined the fray, with a little $29 black-and-white digital camera accessory for their Gameboy toy.

Now, the quality of the pictures you get with these toy cameras may be nothing to write home about. And granted, most self-respecting adults would not rather be seen in public with a camera that's officially endorsed by the Rugrats.

But the people who are marketing these cameras are doing some very smart things the rest of our industry might consider emulating: They are creating cameras that are easy -- and lots of fun -- to use. They are doing creative things with camera design and software to target their products to specific market segments. They are creating packaging and advertising that works hard at selling the product by showing kids all the ways they can enjoy playing with the camera.

They realize that the hardware -- that is, the camera and its advanced technology -- is not, in itself, of any particular interest to their customers. Instead, they focus on the cool applications that come bundled with the camera. Such as turning picture of your friends into tiny decals you can paste onto your fingernails.

They realize that the picture business isn't just about preserving memories. We are moving into an era of take-and-toss pictures....pictures for the fun of it, pictures for play and pictures for socializing.

Perhaps most important, they are offering products in a price range the market is willing to pay. Parents can compare the "WWF Slam Cam," sold for $39.95 at Toys R Us, with other toys or with other cameras, and conclude it represents a reasonably good value. I would argue that the value proposition for serious digital cameras is still not nearly as clear.

One more interesting point about these toy digital cameras. Take another look at the product names. Not one of them is billed, first and foremost, as a "digital" camera. To these toymakers, that's an apparently irrelevant distinction.

And that brings me to what might be the most controversial suggestion you will hear this week:

I propose it's time for our industry to stop marketing digital photography. Sure, we can continue to sell digital cameras and digital print services and all the rest. But we may have to admit to ourselves that very few consumers share our infatuation with the technology. They have a saying in the hardware store business: People who buy quarter-inch drill bits don't actually want quarter-inch drill bits. What they really want is a quarter-inch hole. In photography, digital or otherwise, the technology is not the desired product. People buy good cameras because they want good pictures.

And the truth is, consumers are quite happy with the pictures they take with their 35 millimeter or APS cameras. The quality is good, the price is reasonable and, thanks to the thousands of mini-labs across the country, they can get prints back in the space of one hour.

It is up to us, as an industry, to give people compelling reasons to switch to digital. And the best way to do this is by demonstrating, clearly and convincingly, how digital technology can solve some of the most common picture-taking problems and complaints.

Complaints such as: "I just ran out of film." . . . or "I'm not sure if the picture I shot will be any good." . . . or "I don't want to pay for a print every time I snap the shutter. I just want to buy the pictures I like."

Obviously, digital cameras nicely solve all of these problems. And, in the near future, they will be able to solve even more picture-taking dilemmas. For example, we're now exploring the concept of "wearable cameras": digital cameras small enough to be incorporated into a pair of sunglasses or a piece of jewelry. As soon as products like these hit the market, there will no longer be an excuse for anyone to say, "Darn! I wish I had my camera with me!"

We will also soon be able to help everyone who's ever looked at an old snapshot and asked, "Who is that person sitting next to Uncle Ralph?" or, "Where on earth was that picture taken?" or, "Was this a photo from my second wedding? Or my third?" I'm sure many of you are familiar with the concept of "meta data" Simply put, it's the ability to permanently attach reference data, in digital format, on your pictures. And it's coming sooner then you may think.

Unfortunately, most marketing efforts for digital photography don't seem to concern themselves with making picture-taking more convenient and trouble-free.

If anything, the industry has made picture-taking more difficult and more complicated by cramming onto digital cameras more features, more buttons and more bells and whistles than most people want or need.

Camera manufacturers are engaged in a fiercely fought, but fruitless game of "feature wars" -- fruitless, because what the average consumer really wants, above all else, is point-and-shoot simplicity.

There's not much point in selling people cameras that promise to solve some of their picture-taking frustrations, if those cameras only create a whole new set of frustrations.

And if we allow ourselves to be perfectly honest, that's exactly what we've done with digital. We haven't fully addressed the fact that a digital camera by itself is useless -- without a convenient and simple system for storing, sharing and printing the images you capture. A system that doesn't force people to wait for long uploads to their computer or the Internet....or require them to tweak and adjust the color software that runs their home printer.

Although some of us might not have enjoyed reading his words a few weeks ago in the Wall Street Journal, Walter Mossberg may been speaking for most consumers, when he characterized the process of getting pictures from a digital camera into a PC as, "a mess and a hassle."

In short, digital cameras must be hooked to a system that delivers the same promise George Eastman made for his system one hundred years ago: "You press the button. We do the rest."

Believe me, Kodak is addressing these issues as fast as we can. Given our heritage, people expect us to lead the way in ease-of-use.

For example, imagine coming home from a vacation at Disney World, with 150 pictures stored on your 64 megabyte digital memory card. The moment you walk in the door, your camera begins uploading the images to your computer, wirelessly, before you've even unpacked it from your suitcase. By the time the luggage is put away, your pictures are online, ready to share with friends. Kodak RF wireless technology will soon make this an everyday reality, by transmitting images at the rate of 20 megabytes per second.

We are making sure that people who buy digital cameras can get prints with the same ease and convenience they've come to depend upon for their film photofinishing. With our new digital mini-labs, consumers can bring their digital camera memory cards to their favorite retailer and get back high quality Kodak silver halide prints.

And through our recently announced joint venture with Hewlett Packard, even the smallest retail locations will soon be able to offer outstanding, durable inkjet prints from digital files.

We are also making the process easier for consumers who print their digital pictures at home, by working with photo software developers to ensure their products qualify for our Kodak Picture Friendly seal of quality. We want to make sure that people can count on Kodak for the same advanced color technology and seamless operation in home printing, as they do at the retail counter.

However, by making picture taking and picture making easy, we've really done no more than catch up with what George Eastman achieved 100 years ago. To make digital photography grow, we must give people new things...more things...to do with their pictures.

For example we will soon offer easy to use software for creating photo album pages on a computer screen, using your own snapshots and captions. Click the "Print at Kodak" button, and instead of an envelope of individual prints, we'll send you the entire page, printed on Kodak paper and ready to place in an album or scrapbook.

At our Kodak-dot-com website, we've had great success with something we call the "Picture Playground," an area where people can have fun with their pictures, turning them into puzzles, postcards or dozens of other applications. The average visitor spends 60 minutes at Picture Playground, uploading 10 to 15 pictures during their stay. Talk about sticky -- this site is virtual Superglue!

We believe brand identity will become even more important in the digital era. No one wants to risk the content that's most important to them -- their pictures -- to an unknown or unproven entity.

Brands create continuity, linking new products with well-established consumer relationships. That's why those toy camera companies are branding their products with Barbie and Nickelodeon and other proven franchises. That's why so many online photo dot com businesses are talking to us about co-branding their websites with a Kodak photofinishing logo. That's why even our own Kodak-branded digital cameras are being positioned to benefit from another popular brand, a brand called "Mission Impossible." And that's why you will see the Kodak brand play a prominent role in every digital photography space: in capture, in scanning, in storage, in sharing, in photo communities and in output.

Ten years ago, no one could have predicted that Kodak would one day take the leadership role in digital photography. Certainly, no one would have predicted that Kodak's digital products and services would grow to a $2.3 billion business by 1999.

The truth is, we are convinced that there has never been a better time to be in the picture business. And not just because digital has created some new excitement...a new buzz around pictures. What's more intriguing is how digital can change the way people take and use pictures.

Suddenly, there are no boundaries to how often you can take pictures, because film cost or availability is no longer an issue. Suddenly, there are no boundaries limiting when you can take pictures, because digital cameras have conveniently become hooked onto everything, from telephones to the new Kodak Palm Pix camera that attaches to your Palm Pilot PDA. Suddenly, there are no boundaries on how widely you can share pictures, because it's now done instantly, at the click of a mouse. Suddenly, there are no boundaries on how many pictures you can easily store and organize, and by doing it all online, you can also retrieve your pictures, from anywhere on earth, any time of the day or night. Suddenly, there are no boundaries on how you will use pictures. Yes, you'll still use pictures for preserving memories...but also for fun, for learning, for business, for e-mailing, for every conceivable aspect of a new picture-rich way of life.

But eliminating all of these boundaries with technology doesn't mean that people will notice the boundaries have disappeared. Human behavior changes slowly and old habits die hard.

What our industry really needs right now is a broad educational effort to redefine people's perceptions about how, when, where and why they should take and use pictures.

If this sounds reminiscent of George Eastman's marketing challenge . . . well, it's really no different. Digital photography can complete the revolution Eastman started in 1900, by making pictures a ubiquitous part of everyone's daily life.

Kodak has already started the process of changing people's ideas about pictures, with campaigns urging consumers to capture "everyday moments," and by encouraging just-for-fun, spontaneous picture taking by teens.

These days, though, it will take more than one company to change a century of consumer habits and perceptions. With the participation of the entire industry, I am confident that we can lead the way towards a more picture-rich era... and that, together, we can break through the technical barriers and marketing challenges facing us, no matter how difficult...

ANTHONY HOPKINS:(On screen in clip from Mission Impossible 2:) "'Difficult' should be a walk in the park for you."

DAN: I couldn't have said it better! Thank you!"

"The Coolpix 990 turns out some of the sharpest images I have seen yet from a three megapixel digicam. The color balance and saturation is very good and the exposure control is what we have come to expect from Nikon's best cameras. Just as the Coolpix 950 was one of the top selling cameras of 1999 I have no doubts that the new 990 is going to do the same in 2000. It's everything the 950 was and more, a whole lot more!"

"This is the perfect addition to your desk at work, at home on the shelf with other family photos or as a present for that special Grandmother or other relative. When you want to update their photo album just send them a CF or SM memory card in the mail and tell them to send back the old one and use it again."

"Kodak's online photo infrastructure has multiple 'touch points' with retailers and consumers, and we will work with LightSurf to enhance our infrastructure's community capabilities, such as sharing, viewing and albuming, among others. Kodak's strategy is to build the premier online photo community through innovative products and services. LightSurf's innovations in ePhoto server technology and wireless communications make them an ideal technology partner to help us further enhance the way consumers use and share pictures on the Internet."

"Allin Digital Imaging has demonstrated that they have the industry expertise and established brand identity to support our aggressive push into the professional portrait segment of the US market. Allin's Portraits Online Business-to-Business E-Commerce platform is an excellent example of Allin's ability to build custom solutions for this market and was a major factor in our selection of Allin as a partner in the United States."

"The advent of our Asia-Pacific headquarters and pending Japanese site launch underscores our unique, rapid globalization strategy. Our unique scalability and proprietary automated dispatching and workflow system allows us to meet the needs of customers globally, without compromising quality and convenience. PhotoAccess.com is proud to be the first U.S. mover into Japan, the world's largest digital imaging marketplace."

"BIP technology solves bandwidth-related performance issues which have always been a barrier to working with digital photos over the Internet. By eliminating any bandwidth issues, BIP makes online photo enhancement a favorable experience, which is actually more efficient than traditional local photo enhancement - particularly for users who store their photos online in photo sites. While other companies offer online enhancement capabilities, they require users to pass high resolution data over the Internet. This reliance on bandwidth results in an inconsistent and often slow experience for the user. The result is that online photo enhancement loses its appeal, and loses its stickiness for the host site."

"This marks a major milestone in photographic technology. Because of Digita, applications such as Post can run inside the camera and transform it into a powerful, mobile tool - independent of a PC. Digita Post enables a groundbreaking communications imaging solution for the first time."

"the U.S. Federal District Court has ruled that Lexar Media, Inc. ... has infringed a fundamental solid state flash memory card patent held by SanDisk. The judge also denied two motions by Lexar -- one claiming SanDisk's '987 patent is invalid and requesting a partial summary judgment of non-infringement. Eli Harari, SanDisk CEO and president, said, 'Judge Breyer's ruling vindicates our stand with regard to Lexar's infringement of SanDisk's '987 patent. We had on several occasions offered a patent cross-licensing agreement to Lexar under reasonable terms, but Lexar rejected our proposals. Our strategy has been, and remains, to license our patents to enable an open, competitive market for flash cards. We believe that this ruling strongly reaffirms SanDisk's pioneering innovations in flash memory storage and are optimistic that it will pave the way for other flash memory card suppliers that are not currently licensed by SanDisk to negotiate cross-licenses with SanDisk.'"

"SanDisk has been engaged in patent cross-license discussions with Mitsubishi Electric. We believe that Mitsubishi Electric's latest action is intended to secure for them a cross-license for our valuable portfolio of patents. We intend to vigorously defend our intellectual property rights."