Its stock fell $1.08, or 4.7 percent, to close at $22.06 Wednesday on the New York Stock Exchange after tumbling earlier to $20.91, its lowest level since September 2003.

Kodak lost the equivalent of $3.58 a share in the July-September quarter, compared with a profit of $458 million, or $1.60 a share, a year ago. Its loss from continuing operations, excluding one-time charges, was $103 million.

While stung once more by the rapid slide in film sales, Kodak found solace in its steady drive into the digital era. Its overall digital sales in the quarter surged 47 percent to $1.89 billion, while revenues from film, paper and other traditional, chemical-based businesses slumped 20 percent to $1.66 billion.

"This is an important milestone in our transformation journey," Kodak's chief executive, Antonio Perez, said in a conference call with analysts. "We're building a strong digital company for the future."

The quarterly loss, Kodak's third in a row, included a non-cash charge of $900 million, or $3.13 a share -- an accounting requirement directly related to its huge overhaul. In July, Kodak disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004.

"It was a weak quarter," said Shannon Cross of Cross Research in Short Hills, N.J., citing an unexpected slowdown in consumer digital camera sales and shortfalls in the health-imaging division's digital business.

But Ulysses Yannas, a broker for Buckman, Buckman & Reid, said he was encouraged by signs of improving gross profit margins. "The picture doesn't seem to be as bleak as the numbers tend to indicate," Yannas said, singling out a jump in photo-kiosk sales at major retailers.

Kodak warned last month that a sluggish economy and delays in medical-imaging installations would likely crimp its digital profits this year, forcing it to build fewer digital cameras and home printers for the end-of-year holiday season. It had projected profits of about $275 million to $325 million.

The 124-year-old company is also battling a steep drop in demand for conventional silver-halide film, its cash cow for decades. Film sales look set to drop by more than 30 percent in the United States this year.

Kodak said its digital camera sales rose 20 percent in the quarter, while sales of home printers and accessories soared 45 percent and kiosk sales were up 48 percent. Helped in part by a reallocation of certain costs to its traditional business, its digital profit rose to $10 million from $6 million a year ago.

But graphic communications sales nearly tripled to $886 million, helped in part by its $980 million buyout of Canada's Creo Inc., and operating earnings were $15 million, compared with a loss of $16 million a year ago.

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