The leaner, post-bankruptcy Kodak still facing an uphill battle
A celebrated company whose little yellow packages of film documented generations of birthday parties, weddings and anniversaries, the new Kodak will be more commercially focused, providing printing and imaging services to businesses as well as film to the movie industry.
Consumers will probably still be able to find Kodak-brand film and digital cameras, and they will still be able to download and print their digital pictures at kiosks.
Those businesses will no longer be owned by Kodak, however. As part of the more than year-long bankruptcy process, they were sold to others.
Antonio Perez, Kodak's oft-criticised chief executive, who has been trying to stage a turnaround of the company since 2005 and has overseen it through bankruptcy proceedings, said in a news release last week that the company was positioned for a "profitable and sustainable future".
Some sceptics sounded warnings, though, noting that certain commercial businesses that the company is banking on are fiercely competitive and that Kodak's own projections show steep declines in growth in other business lines.
"The company made a big mistake of riding the cash cow - film - to the point that there was simply no more milk coming from it," said George Conboy, chairman of Brighton Securities in Rochester, where the company's predecessor was founded in 1881.
Kodak cleared a big hurdle last week when it said it would spin off two businesses to the Kodak Pension Plan in Britain for $US650 million in cash and debt. The agreement still needs court approval.
The segments that were sold include document imaging and the business that made Kodak a household name, its camera film and photographic paper lines.
The bankruptcy process hit a major snag last year, however, when the company struggled to sell what it considered to be a crown jewel - a package of 1100 digital imaging patents.
Kodak had hoped the patents would go for as much as $US2.6 billion, but a consortium of buyers that included some of the world's largest technology companies - such as Apple, Google and Facebook - bought them in December for far less, about $US527 million.
"What that situation signified - which was part of the problem with the whole business model - is that they thought their technology and their patents were more valuable than they really were," said Jay Westbrook, a professor at the University of Texas Law School.
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Kodak is expected to emerge from bankruptcy in the summer or fall. Investors should expect a much smaller, more commercially focused company — concentrating on printing and imaging services for businesses and supplying film to the movie industry — rather than the diversified consumer-focused Kodak of the past.
Consumers will probably still be able to find Kodak‑brand film, digital cameras and photo‑printing kiosks, but those businesses were sold to other companies during the bankruptcy process and will no longer be owned by Kodak.
As part of the restructuring, Kodak sold or spun off segments including document imaging and its camera film and photographic paper lines. The company also reached an agreement to spin off two businesses to the Kodak Pension Plan in Britain for US$650 million in cash and debt, a deal that still requires court approval.
Kodak sold a package of about 1,100 digital imaging patents to a consortium that included major technology companies such as Apple, Google and Facebook for roughly US$527 million. That was far short of Kodak’s earlier hope that the patents might fetch as much as US$2.6 billion.
Views are mixed: CEO Antonio Perez said Kodak is positioned for a 'profitable and sustainable future,' but sceptics warn the commercial markets Kodak is pursuing are fiercely competitive. Critics note Kodak rode its film 'cash cow' too long, and company projections show steep declines in some lines.
The relatively low price achieved for the patents suggests Kodak may have overestimated the value of its technology, highlighting a weakness in the old business model. For investors, this signals that asset realizations in bankruptcy can be much lower than expected and that recovery prospects may be constrained.
The article notes a buyer consortium for Kodak’s patents that included large technology firms such as Apple, Google and Facebook. It also mentions the Kodak Pension Plan in Britain as the counterparty to a US$650 million spin‑off agreement.
Investors should watch for court approval of the pension plan spin‑off, any further asset sales or restructuring details, management’s execution on its commercial strategy, and signs of how competitive pressures and declining growth in some lines affect revenue and profitability.
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