According to data compiled by Bloomberg, Kodak has reported losses in 5 out of six previous years since Antonio Perez became Kodak’s chief executive officer in 2005. Sales have declined every year as the company reported a total of $2.5 billion in losses. Share prices dropped from a height of $94.25 a share in February 1997 to just $2.14 at close last Tuesday and in an attempt to recover some of the shareholders’ losses, Perez is now selling of valuable Kodak patents to the highest bidders.
Kodak have “missed the boat”
In a telephone interview with Bloomberg, Walter Todd, who helps manage $950 million at Greenwood Capital in Greenwood South Carolina USA, says Kodak have “missed the boat with the transition to digital but they do have some valuable assets”. It is estimated that the Rochester based company may be holding patents worth five times more than the business itself, making the 131- year-old camera company a prime acquisition target in the billion-dollar hunt for inventions used in mobile phones.
According to the Bloomberg data, Kodak once had a market value of more than $30 billion but as demand for film photography withered, Nikon & Canon started producing digital cameras for the pro market and smart phones, equipped to take pictures, siphoned off demand for its consumer cameras, Kodak’s equity has dropped to below $600 million!
“Kodak is the lowest hanging fruit out there,”
These are the words of Chris Marlett, chief executive officer at MDB Capital, in an interview with Bloomberg. MDB is a Santa Monica, California-based investment bank specializing in intellectual property. Mr Marlett further stated that Kodak “could go for a huge number and nobody’s talking about it,” he said. According to MDB, Kodak’s digital-imaging patents which may now be worth $3 billion in a sale especially since Google Inc. (GOOG) paid a dot-com era premium to acquire Motorola Mobility Holdings Inc. and obtain its more than 17,000 patents to combat Apple Inc. (AAPL)’s iPhone.
According to Rafferty Capital Markets LLC, although Kodak has a $1.2 billion pension shortfall, potential buyers such as Microsoft Corp. (MSFT) and Samsung Electronics Co. stand to profit from its technologies that are used in 85 percent of digital cameras and smartphones.
So in an effort to protect against unwanted takeovers, Kodak recently adopted a shareholder-rights plan. The move shows how concerned Kodak is over the likelihood that an acquirer could buy the company for “much cheaper than you could buy the patents,” said MDB Capital’s Marlett. “There are some pretty crucial patents here, and there are a lot of people who should be very interested in buying these,” he said. “The auction for the sale of these patents is going to underscore that there’s a big disconnect between the value of the IP and the value of the stock.”
Who might the buyers be?
According to Ken Luskin, chief executive officer of Intrinsic Value Asset Management, who also owns 1.7 million Kodak shares, companies waiting in the wing are software producer, Microsoft, internet giant, Google, and maker of Galaxy phones and tablet computers, Samsung. All three companies either declined to comment or did not respond to phone calls and emails.
Keith Wirtz, Cincinnati-based chief investment officer at Fifth Third Asset Management summed it up prophetically in his interview, “Someone is going to buy the company (Kodak) and tear it apart.”