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Following the footsteps of Eastman Kodak, FujiFilm too has decided to offload its photo creating and sharing website to Shutterfly Inc. (SFLY - Analyst Report). In a recent agreement, Fuji Film divested its photo creating and sharing website, which will be shut down on November 8, 2012.

In line with the agreement, SeeHere customers are now able to transfer their images to Shutterfly’s platform from October 8 till November 8, without any charge. The customers who choose to avail this offer will be able to access Shutterfly’s free, unlimited photo storage facilities as well as efficient customer services. Additionally, any customer who is new to Shutterfly will also get a $20 credit to their accounts, to be spent on anything within the site.  

This latest deal follows Shutterfly’s acquisition of Kodak Gallery online photo services in June-July, this year. Like, the Kodak Gallery had also allowed users to store and share their photos online, and create custom printed photo books, cards and albums.

These deals reinforce Shutterfly’s industry leading position in the online photo business. The California-based company will be able to leverage its online photo sharing as well as photo book business through these acquisitions.

Shutterfly is focused on growing its business through acquisitions as well as strategic partnerships with retailers. Apart from those above–said acquisitions, Shutterfly, in the last three years, took control of a mobile application developing company – Penguin Digital, Israel-based photo software company – Photoccino and a leading online social expression and publishing services company – Tiny Prints as well as Nexo and TinyPictures. We believe that such strategic acquisitions augur well for Shutterfly.

The digital photography products and services industry remains cut throat and we expect competition to increase in the future as the company’s peers improve offerings and new participants enter the market. Shutterfly has numerous competitors, including Snapfish owned by Hewlett-Packard Company (HPQ - Analyst Report), American Greetings Corp.’s Webshots brand and Vistaprint N.V. (VPRT - Analyst Report).

Shutterfly is benefiting considerably from its scale advantage and the vertical integration. To meet the surging demand for its products, Shutterfly is on the verge of successfully expanding its East Coast photo-product operations with a new facility in South Carolina.

Shutterfly currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are maintaining our long-term ‘Outperform’ recommendation on the stock.

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