Apple, Google, RIMM: Kodak's Patent Buyers?

ROCHESTER, N.Y. ( TheStreet) -- Apple ( AAPL), Google ( GOOG), HTC and Research In Motion ( RIMM) are among the potential bidders for Eastman Kodak's ( EK) lucrative trove of digital imaging patents, according to patent expert Alexander Poltorak.

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 and imaging company itself , fetching as much as $3 billion, according to some analysts. Reports surfaced last month that Kodak was working to sell off its patents.

Poltorak told TheStreet he believes Kodak has a "very valuable portfolio" of patents which "will fetch a respectable price." He said that good patents are typically sold for between $200,000 and $250,000 each, though the price per patent is often lower when large portfolios are bought and sold.

Kodak 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.

By Poltorak's estimate, the portfolio could be worth around $250 million, far less than the $3 billion some analysts have forecast, though "the important question is how much are these patents exhausted, for example, how much of the market has been already licensed and what is left. This requires a careful analysis of all existing license agreements Kodak is a party to."

As for who might be working on a bid for Kodak's patents, Poltorak said Apple and Research In Motion, both of which are current defendants in Kodak lawsuits, are possible buyers. Google or HTC could also be in the game as operating companies "in need of bolstering their defensive patent portfolios."

Other potential bidders, according to Poltorak, could be non-practicing entities, or companies that would acquire the patents for the purpose of licensing them or enforcing them among unauthorized users; patent aggregators like RPX ( RPXC) which might consider the acquisition as a means of appeasing its members; and "opportunistic hedge funds and private-equity groups interested in investing in an alternative asset class."

Poltorak said the first round of official bidding is expected in mid-October, so it's any day now.

Meanwhile, Kodak shares have swung wildly in recent sessions amid unusually heavy trading, even falling below $1 on Sept. 30 after The Wall Street Journal reported that Kodak had hired Jones Day for restructuring advice.

The company issued a statement after the closing bell that day denying any intention of filing for bankruptcy. Commenting on its hiring of Jones Day, Kodak said it is "committed to meeting all of its obligations" and "also continues to actively pursue its previously announced strategy to monetize its digital imaging patent portfolio. Kodak remains focused on meeting its commitments to customers and suppliers, and on delivering on its strategy to become a profitable, sustainable digital company."

"It is not unusual for a company in transformation to explore all options and to engage a variety of outside advisers, including financial and legal advisers," Kodak added. Jones Day is an adviser on bankruptcy, but also on other paths companies may take to boost their financial positions, including raising new debt or equity, or negotiating swaps of debt forgiveness for ownership stakes.

Kodak confirmed it had hired Jones Day, but said it "is one of a number of advisers that Kodak is working with."

Last week Kodak said it made a $14 million payment to its bondholders, according to spokesman Chris Veronda. That followed word days earlier that Fitch Ratings had cut its rating on Kodak to CC from CCC which it said "signifies that default of some kind appears probable." In late September , Kodak drew $160 million against its credit line saying it was borrowing the funds "for general corporate purposes," according to a filing with the Securities and Exchange Commission. With an interest rate of 1.5%, Kodak has until 2016 to repay the loan. The drawdown followed Kodak's move in April when it entered into an agreement for a new credit facility of up to $400 million.

Kodak's Future

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 analyt 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.

CEO 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 acquired Motorola Mobility Holdings ( MMI) at a hefty premium, largely for the accumulation of 17,000 technology patents the target holds, as the search giant moved to better compete with Apple's iPhone.

Despite Kodak's $1.2 billion pension shortfall, potential acquirers like Microsoft ( MSFT) and Samsung Electronics could benefit greatly from its 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 Journal.

Kodak shares fell 0.7% to $1.38 at midday Monday. The stock remains down around 74% year to date.

-- Written by Miriam Marcus Reimer in New York.

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