(FORTUNE Magazine) – GALLONS OF INK HAVE BEEN SPILLED to chronicle the fall and rise of Eastman Kodak and Xerox, two blue-chip American companies whose turnarounds have captivated the business world over the past few years.

Kodak's shares are up 62% since bottoming out in October 2003 following CEO Daniel Carp's announcement that Kodak would abandon its traditional film and camera business and dive headlong into digital technologies. Xerox's stock, meanwhile, has soared almost fourfold from its $4 nadir in December 2000 as CEO Anne Mulcahy ditched the stagnant analog-copier market to embrace digital products and services.

Now past their near-death experiences, these digitally enhanced icons find themselves, ironically, pitted against each other. The companies, both coincidentally founded in Rochester, N.Y., are going head-to-head in a fast-growing sector of one of the world's oldest and largest industries: printing.

The attraction for both companies is the ongoing shift from so-called "offset" printing to digital or "on demand." (We're not talking about desktop printers--these machines can be two car-lengths long and cost half a million bucks.) Whereas offset printing requires huge volumes in order to be cost-effective, digital allows commercial printers to handle smaller, more customized jobs. For example: real estate brochures for a select, high-income group, or targeted direct mail that increases response rates. The digital opportunity is huge: According to consultancy InfoTrends/CAP Ventures, there are 873 billion pages currently produced using offset printing that could be converted to digital printing. That's $18 billion up for grabs. And the really juicy margins come from annual sales of toner, services, and other supplies.

This isn't the first time that Xerox and Kodak have squared off. In the 1970s and 1980s the two companies fought for control of the office-copier market. Kodak, however, was never able to supplant Xerox's dominant market share, and it exited the business in the late 1990s.

Again Kodak appears to be the underdog. Xerox pioneered this market back in 1990 when it introduced the DocuTech, the first successful commercial black-and-white digital printer. Altogether Xerox's production business stands at $4.5 billion, just over a quarter of the company's overall revenues. By contrast Kodak only recently entered the market--or re-entered, to be more precise. In January, Kodak acquired the digital printing business of a small firm called Scitex--the same business that it had sold to Scitex 11 years earlier. (Kodak has since renamed the unit Versamark.) Four months later Kodak took full ownership of a joint venture that produces the NexPress 2100 digital color printer. Kodak is now in the midst of integrating Versamark and NexPress with several other related businesses it owns. Together the units make up about 12% of Kodak's overall revenues. "They realized that this was a market they should have stayed in," says Frank Romano, professor emeritus of printing at the Rochester Institute of Technology. Perhaps if they had, Kodak's digital future would be a bit clearer. -- Matthew Boyle