The recent announcement by Agfa that it is selling its Consumer Imaging division is one of the clearest signs we have seen that digital processes are rapidly replacing analog processes. Consumer Imaging is the conventional photographic market selling film and cameras. This for many years has been Agfa’s cash cow business that funded development for both the Graphic Systems and HealthCare markets.

Agfa is selling Consumer Imaging to a group comprising both existing management and external venture capital organisations for a sum of €155 million. This new company will be known as AgfaPhoto, but will have rights to use the Agfa brand for an unlimited time period. Looking at Agfa’s financial results for the first half of 2004 it can be seen that the Consumer Imaging business has been diminishing rapidly. Its turnover for this six month period of €363 million dropped 17.9% from the same period in 2003. These half yearly results from Agfa show that while the overall business improved slightly in the second quarter of the year, overall company results are not that impressive.

Graphic Systems, the division that services the printing industry, had sales down by 2.8% from the same period in 2003, but its operating results before tax were down by 33.3%. This does not take into account sales made at drupa. What this shows is Graphic Systems operates in a very competitive market where price-cutting has become the norm, and is heavily impacted its margins. The other division, HealthCare, also showed a drop in revenue with a comparable drop in profitability. Its profitability however is more than twice that of Graphic Systems despite a lower level of revenue. Obviously the same level of competition that is faced by Graphic Systems does not impact the health care market.