In switching focus from film to the more lucrative digital market, Kodak will incur charges of up to $1.7bn over the next three years. Between $700m and $900m will go towards severance costs and $600m to $800m towards the sale of buildings and equipment.

The company, which last week announced that it would cease production of traditional 35mm cameras in the US, Canada and western Europe, said the job cuts are expected to save the company $800m to $1bn by 2007.

"These plans are the consequence of market realities and they will help us to fund a future for Kodak of sustainable, profitable growth," said Antonio Perez, Kodak president. "They are absolutely required for Kodak to succeed in traditional markets as well as the digital markets to which our businesses are rapidly shifting."

Kodak, based in Rochester, upstate New York, announced the job cuts as it reported an 83% fall in fourth quarter net income, with film camera demand continuing to decline. Kodak posted net income of $19m, down sharply from $113m a year earlier