NEW YORK (CNN/Money) - Eastman Kodak is focusing on the top spot in the digital camera market after being widely regarded as the latecomer to the party. But its late push into the business may have some unintended consequences.

Kodak is now second in the U.S. digital camera market after shipping 830,000 cameras in the second quarter, close on the heels of market leader Sony, which shipped 1 million units, according to a recent report by research firm IDC.

"No question this is a positive," said Ulysses Yannas, analyst with Buckman, Buckman & Reid. "Kodak's strengths include wide product range, ease of use and a brand name with high recognition."

What's more, by next year, Kodak and its shipment growth rate of 82.4 percent could edge Sony, with a growth rate of 49.3 percent, for the top spot in the digital camera market.

"Kodak is in good shape to continue its growth," said Chris Chute, senior analyst with IDC. "The majority of camera sales come in the final three months of the year, and its simpler, lower-cost cameras should benefit."

But Kodak's gains haven't come easy.

The Rochester, N.Y.-based company has gone through a long, tough restructuring, which includes slashing its dividend by 72 percent, stopping investment in its traditional film business and cutting jobs -- the most recent cut removes up to 15,000 employees over a three-year period.

Although painful, these moves have trickled down to Kodak's bottom line. In late July, the company reported a second-quarter operating profit that trounced analysts' estimates and boosted its full-year profit target above Wall Street's expectations.

Kodak's move into digital cameras is likely to hurt its traditional film business, and its emphasis on low-price cameras may also pressure profits.

"Kodak has had a proliferation strategy to get as many cameras into as many hands as they can," said IDC's Chute. "Bundling agreements, like the one it has with Dell, are partially responsible for the huge gains."

The bundling agreements such as Dell's, where the PC maker offers a camera with one of its computers, typically feature lower-end cameras that have smaller profit margins than cameras sold through retail channels.

And Kodak's reliance on lower-cost cameras and bundling agreements has some analysts concerned.

The company's digital and film-imaging systems division, its largest with about 70 percent of its sales, also posts a narrower profit margin than any of its other profitable divisions.

The digital division managed a profit margin of 9.6 percent, far lower than the 19 percent margin in its Health Imaging division and the 16.6 percent margin on its Commercial Imaging division, according to the company's last quarterly regulatory filing.

"We anticipate that gross margins will narrow as a result of pricing pressures and ongoing digital substitution," wrote Standard & Poor's equity analyst Richard Stice in a recent report. "We see the company struggling to maintain its market share and think pricing pressures are cutting into margins."

However, Kodak spokesman Anthony Sanzio said the company believes greater market share will bring it more opportunity as it moves to emphasize higher-end cameras.

"We built the digital camera business to appeal to the mass market and believe our cost structure is the lowest in the industry," he noted. "The business should really be thought of as a system, rather than a camera alone."

Although Kodak's profit margins may be suffering at the hands of its digital surge, it's all part of the plan, according to Buckman, Buckman & Reid's Yannas.

"The money isn't made in digital cameras, it's in the printing," he said. "They'll make the money with paper sales, processing technology and eventually with its online [picture storage] Ofoto service."

So the questions facing Kodak are what kind of boost its digital printing sales will get from all those cameras, and whether they'll be enough to offset the lower margins in the camera division.

"Compensation from the printing business will be difficult," S&P's Stice, who has a "sell" rating on the stock and a $20 price target, told CNN/Money. "People may not want to print pictures. They may just upload them onto a computer and send them around that way."

In addition, if Kodak is looking to make its money on the printing end, it faces stiff competition from Hewlett-Packard and Dell.

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Hewlett-Packard's profit margin in its imaging division is 16.4 percent, according to its regulatory filing, well above Kodak's imaging division's 9.6 percent. Dell does not break out results of its imaging division.

However, the stock market has looked at Kodak's (EK: Research, Estimates) gains in the digital camera market as a positive. Shares of the one-time Dow component have climbed 4.3 percent to around $28 as of midday Wednesday since the release of the IDC report.

"[Kodak] is back," said Yannas, who rates the shares a "buy" and also owns some shares. He added that he thinks the stock has a shot at $38 or $40 by the end of the year, "but beauty is in the eye of the beholder."  

--IDC's Chute does not own Kodak shares, but Kodak and its competitors purchase the firm's research.