SAN JOSE -- A few years back, Flectronics invested heavily into camera modules, anticipating that their eventual use in cellphones would give the EMS provider a boost in landing 3G handset contracts.

Today none other than Eastman Kodak said it will divest its entire digital camera manufacturing requirements to Flextronics, including assembly, production, and testing. About 550 Kodak personnel are expected to be transferred to Flextronics facilities. Closing is expected in Kodak's third quarter, pending regulatory approvals. The companies did not specify the value of the deal. However, Deutsche Bank estimated that the deal would grow from
some $750 million in revenue in the first year of production and would grow closer to $1 billion as Flextronics displaces other Eastman Kodak contractors.

Flextronics will also manage certain camera design and development functions. Flextronics will also manage the operations and logistics services for Kodak's digital still cameras.

Kodak will continue to conduct design and research on digital cameras, and retains its intellectual property.

Upon closing Flextronics will acquire a significant portion of Kodak's Digital Product Centers in Chino and Yokohama, Japan, and associated camera design functions and its employees and the digital camera manufacturing, assembly and warehousing requirements and related employees of Kodak Electronics Products, Shanghai Co. Ltd. in China.

Kodak will retain all IP and patents as part of the transaction as well as Kodak trademarks, Kodak trade names, Kodak customers, customer information and customer relationships, Kodak feature specifications, Kodak digital camera designs and Kodak digital camera technologies.

The transaction is subject to customary regulatory approvals.