Kodak in Focus: Patents to Pay Off?

ROCHESTER, N.Y. (TheStreet) -- Eastman Kodak's (EK) shares eased back Tuesday morning after spiking late Monday as the film company has been marketing its trove of patents, a sale of which could prove quite lucrative.

Reports surfaced last month that Kodak was working to sell off its patents. Kodak has struggled to gain momentum in its digital camera business as its printing business flailed, but its digital-imaging patents could be worth far more than the 131-year-old camera company itself, fetching as much as $3 billion, according to some analysts.

CEO Antonio Perez said in late August that Kodak was in talks with potential buyers, and had signed confidentiality agreements with possible bidders for at least 1,000 Kodak patents.

"This has helped investors feel more comfortable with the name in that they know at least one of the two avenues the company is seeking for cash may pay out," Janney Montgomery Scott analyst Jody Lurie told Bloomberg. "Investors have been scared about the company's cash levels, and as a result, any sort of good news that comes out about the company has improved investors' fears."

Kodak shares spiked in late-day trading Monday, but were 4.9% lower at $2.90 early Tuesday morning.

If Kodak is able to sell its patents, and get as much as $3 billion for them, it would buy the company time to give its inkjet printer business a much-needed boost, according to Gimme Credit analyst David Novosel.

Kodak has been putting more of an emphasis on its printer business lately, picking up market share from Hewlett-Packard ( HP) and Canon ( CAJ) along the way, attracting consumers with more printing features and less-expensive ink.

Even with a patent sale, Kodak intends to hold onto the licensing rights to its proprietary technology.

Perez is looking for buyers willing to pay cash for the patents, but only wants to sell "the part of the portfolio that does not apply to the core investments and the future of the company."

The marketing of patents is a smart move for Kodak -- a company that has struggled after years of annual losses -- particularly in light of M&A news last month that Google ( GOOG) acquired Motorola Mobility Holdings ( MMI) at a hefty premium, largely for the accumulation of 17,000 technology patents the target holds. Google, the search giant, has moved to better compete with Apple's ( AAPL) iPhone.

Despite Kodak's $1.2 billion pension shortfall, potential acquirers like Microsoft ( MSFT) and Samsung Electronics could benefit greatly from Kodak's patents -- technologies used in a bulky 85% of all digital cameras and smartphones -- Rafferty Capital Markets told Bloomberg last month. Investment bank Lazard began marketing Kodak's roster of patents in August, and interested parties included a large wireless provider, according to reports in The Wall Street Journal.

-- Written by Miriam Marcus Reimer in New York.


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