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HP Will Leave Digital Camera Market By '08

11/19/2007 02:00:00 AM Eastern

PALO ALTO, CALIF. – Hewlett-Packard will exit the digital camera business and attempt to license its brand for use in digital cameras to an OEM by 2008.

The company would not comment on the move outside of a published statement. According to HP, the company intends to sell through camera inventory during the holiday season and have an OEM partnership in place in the first half of 2008.

HP couched the move as a means to "accelerate its investment in Print 2.0 initiatives" including home and retail photo printing. The shift in strategy will cause HP to take a pretax charge of $30 million in its fiscal fourth quarter.

The move was a "long time coming," said Chris Chute, IDC digital imaging research manager. The company had fallen from a 2001 high of 15 percent market share (ranked third among its competitors) to just 4 percent, or eighth place, in 2007, Chute said.

The company's initial success owed to its aggressivea entry-level pricing strategy, but as overall average selling prices began falling, and companies like Canon and Sony introduced products at lower price points, HP couldn't compete, Chute said.

"Kodak was in a similar position early on, but they invested and revamped their line," Chute observed.

If any brand stands to benefit from the move, its Kodak, said Ross Rubin, The NPD Group industry analysis director. While the HP brand is likely to remain on the market thanks to licensing, "Kodak has played to the same entry-level consumer and implemented many of the same in-camera features that HP did."

While the digital camera market has continued to grow, HP's exit is a harbinger of things to come Chute said. "If you have less than a 10 percent global share, it's going to be difficult to invest in marketing. The growth right now is benefiting the top players."

"The top three suppliers are solidly positioned," Rubin said, but slowing growth in the point-and-shoot market could make it difficult for other brands, like Samsung and Panasonic, which are still making in-roads in the digital camera market.