The company aims to boost profitability by focusing on the higher growth digital field, the Nihon Keizai Shimbun said, quoting company sources.

A Nikon spokesman said no official decision has been taken but acknowledged film camera sales were shrinking.

"It is a fact that the film camera business is shrinking worldwide. Volume sales are also falling but for the time being, we will continue our film camera operations," he said.

Global shipments of compact film cameras fell below expectations in the first half to September at 440,000, short of a target of 500,000, he added.

On the other hand, the company on Tuesday upgraded its target for digital camera sales to 5.5 million from the previous estimate of 4.6 million. Last year, the company shipped 3.6 million digital cameras.

The newspaper said Nikon will halt all development of 35mm compact cameras for the domestic market from this point on and end shipments to stores starting in the year beginning next April.

The firm currently does not make any compact film cameras in-house, instead outsourcing production to Japanese companies that manufacture the cameras overseas, the newspaper said.

Nikon said Tuesday it returned to the black with a net profit at 2.05 billion yen (18.8 million dollars) for the six months to September, reversing a net loss of 3.48 billion yen a year earlier.

Revenue rose 12 percent to 240.9 billion yen on strong sales of digital cameras and devices for making liquid crystal displays.

For the year to March 2004, Nikon forecast a net profit of 5.5 billion yen, a recurring profit of 3.0 billion yen and sales of 540 billion yen.

Shares in Nikon rose 45 yen or 3.1 percent to close at 1,515 yen on the Tokyo Stock Exchange Thursday.

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