HP, Apple Invest In Online Photo Processor

While the rest of the world seemingly is running, not walking, from Internet investments, have Hewlett-Packard and Apple Computer found a diamond in the rough? Both companies are among the investors in a $41 million round of financing for online photo processor Ofoto Inc.

Ofoto CEO James Joaquin says he was able to distance his company from the dot-com doldrums by focusing on a growth track that has seen revenue for the last two quarters of 2000 double from 1999 levels. Joaquin says Ofoto has a healthy consumer business in addition to commercial arrangements with companies such as HP, Sony, Amazon.com, [email protected], and the two largest online providers of commercial photos, Corbis and Getty Images. "We have great prospects for providing a return on investment," Joaquin says.

Apple execs declined to comment on the company's investment, but Srinivas Sukumar, HP's general manager of digital imaging E-services, says HP, which makes high-quality printing equipment, took a strategic view of Ofoto's combination of digital and traditional photo printing services. It also didn't hurt that Ofoto possesses a unique quality among dot-coms: It's producing a tangible product, and it says it's actually making money doing so. Still, Sukumar admits that had the investment, which was agreed to a few months ago, been considered today, he's not certain HP would still commit the funds. "The overall investment climate has changed," he says.

Keenan Vision analyst Vernon Keenan says that despite the struggles in the Internet arena, the investments by both HP and Apple make perfect sense. Not only are both companies committed to making imaging tools a key part of their product lines, but Keenan says the sluggish market probably increased the stake they could obtain with their investment dollars. The fact that the Barksdale Group and Benchmark Capital are financially behind Ofoto no doubt lent an air of credibility as well. Keenan was particularly intrigued by Apple's investment: "It may herald the introduction of an Apple-branded camera."

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