Kodak Just May have Another Moment

A company noted for many historical inventions files for bankruptcy, but is this truly the end or a new beginning?

Eastman Kodak Co., the company that introduced such marvelous inventions as the Brownie Camera, 35mm color film and the digital camera, filed for chapter 11 bankruptcy this week. Bankruptcy documents revealed that the company listed assets of $5.1 billion and a debt of $6.8 billion.

Whenever someone uses the "b" word, the automatic, and usually correct, assumption is that some poor schmuck just went down without any hope of a comeback. But believe it or not, even companies can make major comebacks - not just actors like Robert Downey Jr.

Why the Downfall?

I suppose Robert Burley, an associate professor at Toronto's Ryerson University, said it best about Kodak: “They were a company stuck in time... Their history was so important to them, this rich century-old history when they made a lot of amazing things and a lot of money along the way. Now their history has become a liability.”

In a nutshell, Kodak basically focused too much on "traditional film." And in doing so, it was not able to compete very well with the likes of Canon Inc. and Hewlett-Packard Co. in the digital cameras and printers market. Antonio Perez, CEO, states that Kodak was 5 years too late to accelerate its shift to the digital age. Perez, 65 and a former Hewlett-Packard executive, took charge at Kodak in 2005 and tried to rescue the brand by cutting costs and winning shelf space for inkjet printers at Wal-Mart Stores Inc. and Staples Inc. He did his best to push commercial DIGITAL printers into publishing and packaging.

In my humble opinion, Perez certainly wasn't wrong to steer the company towards the digital age. Digital business has accounted for about 75%, or $4.5 billion, of Kodak’s revenue last year according to CFO, Antoinette McCorvey.

Is it Over?

Some seem to think so. Kodak has gotten rid of 47,000 employees since 2003, closed 13 factories that produced film, paper and chemicals, along with 130 photo laboratories and this recent restructuring has already cost $3.4 billion.

However, the company may not be undergoing a complete liquidation at all so much as it is undergoing a change for the better, or as Perez puts it, “Kodak is taking a significant step toward enabling our enterprise to complete its transformation.” This bankruptcy, in theory, should allow for the selling off of the photography divisions and patents in order to pay off legacy employee benefits and creditors, while Kodak focuses on faster, flexible commercial and consumer digital printers and the company’s superior ink.

McCorvey mentioned that the company plans on selling "significant assets" during the bankruptcy, but did not mention any further specifics. Logistically, the company's treasure trove of 11,000 patents might just be enough to fund expansion by allowing the company to sue for more licensing fees - something Kodak has been pursuing more aggressively in recent weeks. A couple of days ago, Kodak sued Samsung Electronics Co. claiming that the Samsung Galaxy tablet infringed on technology for capturing and sending digital images.

Now before you start to wonder if suing really works in the corporate world, keep in mind that suing Samsung has indeed 'worked' in the past considering the $550 million settlement Kodak received from them in 2010 during a patent dispute over a feature that allowed users to preview images on their cameras using less processing power and storage. Last week, Kodak also sued HTC Corp. and Apple Inc., while also holding onto cases against Research in Motion Ltd. and Fujifilm Holdings Corp.

No my dear readers, I don't think this is the end of the world for Kodak. Instead, and as a proud fan of underdogs and comeback stories, I believe that the company has a decent shot at rising from the ashes - its proud history might just barely be salvageable, especially under the leadership of a CEO, who has proven in the past that whenever he yells, "The sky is falling!" You damn well better run for cover.

Over and Out,

- Peter

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