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Kodak's Patent Pivot May Not Avert Bankruptcy (Update 1)

Updated to reflect Kodak comment, analyst comments and closing stock prices

NEW YORK ( TheStreet) -- Eastman Kodak's (EK) midyear change in strategy from using patents to strike licensing partnerships - to their outright sale - has yielded few results and may push the storied company to the brink of bankruptcy.

Kodak is desperately looking to raise cash through sales of its 1,100-strong digital imaging patent portfolio in order to stay afloat. But after years of cutting licensing agreements for those same patents to generate profits, Kodak may have inked too many deals for potential buyers to swallow.

Kodak is preparing a bankruptcy filing in the coming weeks of patent sales aren't realized, according to reports by the Wall Street Journal, which cite unnamed sources. The company, which has roughly 19,000 employees, is currently looking to sell patents and business lines, while also litigating intellectual property infringement claims to raise capital and avert a cash shortfall later in 2012.

But the company's plans to offload lucrative patents to hungry buyers -- following purchases by Google (GOOG - Get Report), Apple (AAPL) and Research In Motion (RIMM) this summer -- comes with too many strings attached, an industry professional says.

"It's very difficult to sell patents which have so many encumbrances," says Alexander Poltorak, CEO of General Patent.

Heavily licensed patents are difficult to value because buyers would need to see how far partnerships travel and if infringement claims are already protected by pervious settlements, says Poltorak. He sees Kodak's portfolio as most closely resembling InterDigital (IDCC) and Tessera Technologies (TSRA) in its size and monetization. In contrast, Motorola Mobility's (MMI - Get Report) portfolio -- which was a key in its $12.5 billion sale to Google -- is much less burdened. "[Motorola Mobility] has been very careful about licensing their patent portfolio... [T]hat's why Google was interested in buying them," adds Poltorak.

"We have contemplated shifting our IP monetization approach at an appropriate time which I repetitively said it was about 2012. Given the vision trends in the IP market place and the hiking demand for primer intellectual property portfolios that time has arrived," said Kodak Chief Executive Antonio Perez in a third quarter earnings call.

A lack of digital imaging patent sales since the strategy was unveiled may reflect the company's past success in licensing intellectual property. "We have been successfully monetizing our IP portfolio for seven years," added Perez. For instance, in the fourth quarter Kodak said that licensing agreements will help it end fiscal 2011 with up to $1.4 billion in cash -- a significant boost.
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