Can Kodak rescue itself via a patent bonanza
Post on: 2011-11-02 By: admin
ROCHESTER, N.Y. (AP) — Picture this: Kodak — the company that invented the first digital camera in 1975, and developed the photo technology inside most cellphones and digital devices — is in the midst of the worst crisis in its 131-year history.Now, caught between ruin and revival, Eastman Kodak Co. is reaching ever more deeply into its intellectual treasure chest, betting that a big cash infusion from the sale of 1,100 digital-imaging inventions will see it through a transition that has raised the specter of bankruptcy.Kodak popularized photography over a century ago. It marketed the world's first flexible roll film in 1888 and transformed picture-taking into a mass commodity with the $1 Brownie camera in 1900. But for too long the world's biggest film manufacturer stayed firmly focused on its 20th-century cash cow, and failed to capitalize quickly on its new-wave know-how in digital photography.As a result, Kodak has been playing catch-up. Pummeled by Wall Street over its dwindling cash reserves — and its stumbling attempts to reinvent itself as a profitable player in digital imaging and printing — Kodak has been hawking the digital patents since July. Many financial analysts foresee the portfolio fetching $2 billion to $3 billion.But others think Kodak can haul in far more than that — and carry it off within a few months. That's because patents have become highly valuable to digital device makers who want to protect themselves from intellectual property lawsuits. In July, an alliance made up of Apple and Microsoft purchased a raft of patents from Nortel Networks for $4.5 billion. A month later, Google bought Motorola Mobility for $12.5 billion, in part, to gain hold of the company's 17,000 patents."The size of the (Kodak) deal could blow your socks off," predicts Los Angeles money manager Ken Luskin, whose Intrinsic Value Asset Management owns 3.8 million Kodak shares."It's pocket change for Google and Apple to go pay $3-or-$4-or-$5 billion for these patents," concurs Christopher Marlett, chief executive of MDB Capital, an investment bank based in Santa Monica, Calif., that specializes in intellectual property. "There is an all-out nuclear war right now for global dominance in smartphones, tablets and mobile devices, and Kodak has one of the largest cache of weapons sitting there." Marlett says he owns Kodak stock, but wouldn't disclose how much.Even a hefty return, skeptics counter, won't solve Kodak's struggle to close out a nearly decade-long transformation and return to profitability in 2012 after running up losses in six of the last seven years."All the extra cash does is give you a lifeline for a short period. And then, poof, you're back in the same position without the assets to sell," says analyst Shannon Cross of Cross Research in Livingston, N.J. "If you're burning cash and not finding a way to generate recurring earnings, it doesn't matter."Kodak's grim financial picture should become clearer when it reports third-quarter results Thursday.Agitated investors will likely focus on the company's latest borrowing activities and cash woes — it had $957 million in cash in June, down from $1.6 billion in January. They will also want to know what kind of progress Kodak made in the July-September period in building up a high-margin ink business to replace shriveling film sales.Kodak has poured hundreds of millions of dollars into new lines of inkjet printers that are finally on the verge of turning a profit. Home photo printers, high-speed commercial inkjet presses, workflow software and packaging are viewed as the company's new core. Kodak projects that sales from those four businesses will double to nearly $2 billion in revenue in 2013, accounting for 25 percent of all sales.In the meantime, Kodak needs to tap other sources of revenue before those areas have time to pay off — and mining its inventions has become indispensable.Kodak's chief executive, Antonio Perez, has signed confidentiality agreements with potential buyers but hasn't given a time frame for a deal. The patents for capturing, storing, organizing, editing and sharing digital images do not apply to the four core businesses, Kodak spokesman Gerard Meuchner says."One thing I would stress is: It is our intention to retain a license to any of the intellectual property we sell," Meuchner says. "It's like you sell the property but still get to live in the house."A sale represents a sharp tactical shift. Kodak picked up just $27 million in patent-licensing fees in the first half of 2011 after amassing nearly $2 billion in the previous three years.In the heated environment for patents, "it makes more sense for us to sell the portfolio than it does to license it company by company, which takes lots of time and expense and can involve litigation," Meuchner says.Michael Fitzgerald, chief executive of Next Techs Technologies, a patent buying-and-selling intermediary in Houston, says that while the portfolio is valuable, "I just don't view it necessarily as a 'strategic' acquisition that multiple players will fall all over themselves on."Investor fears sent Kodak stock tumbling to an all-time closing low of 78 cents a share on Sept. 30 after it hired Jones Day, a major restructuring law firm, as an adviser. Kodak insisted it had no intention of filing for bankruptcy protection.Kodak is also involved in a royalty dispute with iPhone behemoth Apple and BlackBerry maker Research in Motion Ltd. The case centers on a 2001 patent now on the auction block — a method that enables a camera to preview low-resolution versions of a moving image while recording still images at higher resolutions.The 21-month-old battle before the U.S. International Trade Commission, a trade-dispute arbiter in Washington, D.C., was due to be revisited on Monday, but was recently shelved until December 30.Chief Executive Antonio Perez thinks a favorable ruling could enable Kodak to draw up to $1 billion in fees from its deep-pocketed rivals. In 2009, the commission ruled that South Korean mobile phone makers Samsung Electronics and LG Electronics infringed the same patent, resulting in $964 million in payouts.
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Kodak needs to bring manufacturing back to the USA.My first digital camera was a Kodak made in Rochester, NY.My new camera is a Nikon.I'd like to buy a Kodak made in the USA but WILL NEVER buy a Kodak made in China.
• Corpus Christi, United States•
Kodak should Invent a camera that can record to both film and flash memory. Make it hybrid SLR. Built it in USA. Make sure it has a cool design (think Apple) and price it rather high so that people think its really cool.
• Lima, United States•
Kodak's digital camera's are great, what they need to do is get rid of the easy share software. This software is a resourse hog and has caused many computers problems. I'm sure they can do better then Easy Share.
• Issaquah, United States•
Kodak is in the film bussiness.Put a coat of film on a thin plate of silicon and makefuel cells or a solar cells
Best of luck, Great Yellow Father!
• Amesbury, United States•
Last year I bought one of their inkjet printers other than it being a tad loud the print quality is great. and the ink for it much less expansive than HP..Also the Kodak cams at pretty decent for the price,
The Kodak CEO still received $5.7 million last year as he continues to run Kodak into the ground.His majority of former employees now earn $0.How many time zero is $5.7 million?
• Cleveland, United States•
Once they're sold, that's it for the company, unless they want to get into something totally different, like marine engines or piano hammers.Sounds like the patents, the secrets so to say, were all they had left.
• Millington, United States•
Don't feel too bad for Kodak; they've been making profits since 1888.
A lot longer than a lot of companies.
Momma, don't take my Kodachrome away....
Reminds me of a store closing, going-out-of-business sale where the fixtures and furniture are up for sale along with the remaining merchandise.
These folk where one of the first to farm out jobs from our Nation.
Let America know how thats working for ya!!!!
• Rochester, United States•
I worked for Kodak for 20 years, they ran themselves into the ground with poor management starting with george fisher.The last terrible thing they did when I was there was to ship a very profitabe single use camera production line to china.If you want a single use camera made in america then buy Fugi.
Kodak has become a patent troll now. Sad end for a once great company.
Are these patents really that valuable? It seems they neither keptthe competition away nor brought in all that much in licensing fees. A lot of good they did for Kodak!
Henry Ford created Buyers out of his workers.Kodak could take a clue.How?I dunno; wish I did, but Kodak has a good imagination.
• Phoenix, United States•
It is interesting that Kodak has to reinvent themselves.They may have been creative and inventive, BUT, they offered the Instamatic in the days of Leica, Hasselblad, and Nikon.Their products were always the Why didn't I think of that variety, but they were always the consumer cheap versions of the good products out there.I liked one of the first digital cameras that had the charging stand built into a printer that printed on 4 X 6 photographic paper.
Maybe they could buy Olympus and turn them around.Olympus had very creative, compact, and innovative 35mm film cameras.Maybe the consistent quality of Kodak, combined with the reputation and optics of Olympus, can change the digital market.
Don't Buy it.Just don't buy it...
this company is toast, just going to sell off things and distribute the cash to stock holders. they have no vision and no product
HP should take notice. They will be doing the same thing in a few moreyears.
• Woburn, United States•
raise the licensing fees and make everything else except cameras for photography to keep the brand viable for consumers. in the meantime, get into the Lightfield Image Recording device business and create a better sensor to try to lock up future licensing.
film is dead, sadly. let 3M and BASF have it for cheap cameras and license the good formulas to them to re-issue using the Kodak brand. focus on the only thing still making money: the technology licensing.
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