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Kodak’s Fight for Survival

The prospect of the photographic company’s possible demise is so melancholy that even a debt-rating firm is waxing poetic.
November 9, 2011

It’s perhaps not unexpected, given that every day brings word of flashy, newfangled photography products to blow your mind–a ball camera to take spherical panoramas, waterproof cameras for extreme athletes, cameras that do party tricks, cameras that let you refocus after the fact. With the onslaught of eye-catching novelty cameras–some surely fleeting and faddish, but some here to stay–how can a more old-fashioned photographic company compete?

It’s not clear that it can. Eastman Kodak warned investors last week that it would need to raise further debt or complete a multibillion-dollar patent sale if it wants to stay afloat for the next year. The announcement fretted investors, and shares plummeted. This, too, after shares already “fell off a cliff,” in MarketBeat’s words, in late September; at one point Kodak became a penny stock, bottoming out at 78 cents a share, the lowest since 1938. Ten years ago, share prices stood around $30.

“The Company’s ability to continue its operations … is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing of the relevant patents and/or the successful execution of the alternative actions, which could include the issuance of additional debt,” Kodak said in a filing with the SEC, Reuters reported.

Gary Rosenbaum, a lawyer with expertise in debt workouts and restructurings, told CNBC this week that Kodak would have to perform a delicate dance, selling only non-strategic patents. “They have to monetize those patents, which can mean licensing or selling. But yes, you have to be careful,” he said. “If you dispose of an asset, what do you have left for investors to focus on?” (On Monday, Kodak did manage to sell off its image sensor business, nudging itself along towards its cash goal for the year.)

The technology business delights in toppling giants who fail to innovate, in clearing out undergrowth, in weeding–and the technology press often stokes the flames of this phoenix-like cycle of burning and regeneration.

And yet, in the case of Eastman Kodak, there is something immeasurably melancholy about the prospect of its passing. The Wall Street Journal even caught a debt-rating firm (not typically known for “philosophical musings,” the Journal noted) getting decidedly poetical about Kodak’s decline. Wrote the firm: “Unless Kodak finds some more liquid fuel in the form of cash proceeds from a patent sale or a favorable court ruling, the light that once illuminated America’s iconic maker of memories will fade from the picture.”

The first Kodak camera appeared in 1888; an 1889 advertisement announced, “You press the button, we do the rest.” Kodak eventually grew to such stature that it became one of those brands whose very name holds a power just shy of that of Kleenex or Xerox, a name practically synonymous with the product of which it is just one of many manufacturers. If you weren’t born before the digital photography revolution, the word “Kodak” evokes those prints that went in your family albums from the ’80s, or the film that you used in a photography course in the ’90s. Nor did Kodak bury its head in the sand during that digital revolution; indeed, the long-term strategy for Kodak would necessarily focus on its digital cameras and printing products. That is, if there is to be a long term.

Doesn’t Kodak just seem too big–culturally–to fail?

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