But even as Kodak reported a $1.03 billion loss for the third quarter, its new leadership -- largely recruited from digital heavyweights like Hewlett-Packard Co. -- say the results show they're making real progress symbolized by one historic milestone: Sales of digital products now exceed revenue from film-based photography for the first time.

Patent-rich Kodak, they also point out, is No. 1 in sales of digital cameras and digital X-ray systems in the United States and photo kiosks, thermal home printers and online photo services worldwide.

"Overall, we're expecting a year of good progress in a historic transition," said Chief Executive Antonio Perez, a former Hewlett-Packard stalwart who took the helm in June.

Others, however, predict the multiyear transformation, which includes the elimination of 25,000 jobs, almost inevitably will lead to even bigger changes.

"They'll probably make it to digital, but it may not be the Kodak we know," said Christopher Hayes, chief investment officer of Hayes-Fischer Capital Management of Rochester.

"As you go from a monopoly to a commodity type of business, you could see Kodak split up in different pieces," he said. "I think people feel that way more, now that you have non-Kodak people running the company. There's not as much allegiance."

At an investor's meeting last month, CEO Perez scaled back short-term profit expectations -- in part because of fears that high gasoline prices and Gulf Coast hurricane damage will slow the economy. But he was bullish about prospects for 2006 and beyond.

"We are at the phase now where digital is still coming up," he said. "You'll start to see it next year very clearly. Three years ago, film was still here, so it was covering up a lot of the sins. And last year ... it was still covering up some of the sins. So we are at the worst possible place."

Kodak shares briefly hit a two-year low Wednesday when the company reported its fourth quarterly loss in a row, which included $900 million in non-cash charges related to its huge overhaul. In trading Friday, Kodak closed at $22.29 -- at the low end of a 52-week range of $20.91 to $35.19.

Kodak is hoping film, its cash cow for a century, will continue to bring enough cash as it steadies on its new bearing. But the clock is running down. Third-quarter revenues from traditional businesses fell 20 percent to $1.66 billion, and film sales could drop more than 30 percent in the U.S. this year.

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