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Today’s Note: Kodak, Photography, Technology and Social Media

January 24, 2012
Kodak Camera

Last week, Kodak filed for Chapter 11 Bankruptcy. It seems almost certain that Kodak will emerge from bankruptcy at some point as a profitable, but not market-leading business. It is astonishing, in the wake of its nearly complete collapse, to look back and realize that fifteen years ago Kodak was the unrivaled global leader in the photography marketplace. What could have happened to this once-Dow component, put-in-your-retirement-portfolio darling in just a decade and a half? “Kodak files for bankruptcy — and files more lawsuits, too” in ExtremeTech.com tries to briefly summarize this enormous plummet.

The article, by Joel Hruska, begins by explaining that “Onetime industry titan Kodak filed for bankruptcy yesterday; the company is petitioning to enter Chapter 11 and reorganize the business. Kodak’s press release indicates that it is making this move ‘to bolster liquidity in the U.S. and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the Company to focus on its most valuable business lines.’” [italics are added by me throughout this post to show a quote from the article….the bold in the preceding passage indicates a quotations from the Kodak press release preserved in the article, and were added by me as well]

In reality, that barely scratches the surface of the situation. The essentially total erosion of the film-based photography market pulled the rug out from underneath numerous lines of Kodak’s cash-cow business, sapping its revenue and infrastructure. Adding to that, it utterly failed to adapt to the movement toward digital photography, believing perhaps that photography couldn’t change around Kodak without its own cooperation. Whatever the case, Kodak’s early moves toward digital were as anemic as they were misguided. Its foray into a photography web site, also late, lacked imagination and vision. Competitor internet sites, such as Yahoo’s flickr, incorporated significant social media elements into their products, and expanded nicely on the prior business model for such sites. Similarly, it’s digital printing business line is a footnote in the market today, at best. That said, it has made some inroads with its EasyShare line of products, but frankly, to me that feel just a little late and a little too ordinary to gain traction in a photography marketplace at a time when disruptive technologies and business models are more the norm than the exception.

So what is Kodak working on? Well, right now it seems to be working on filing lawsuits. Like many other technology related companies, it is trying to “monetize” their intellectual property assets. In Kodak’s case, this move is a little like borrowing from a payday lending company. Kodak has been widely reported to be trying to sell a large fraction of its patent portfolio (almost 10% of it) in exchange for enough cash to keep operating while its new business plan takes shape. Its recent bankruptcy filing very likely indicates that this strategy has failed, or at least failed to raise enough cash to stave off its creditors. Because the bankruptcy filing will make it more difficult to close a patent sale, such a deal seems unlikely in the near future. Which leaves Kodak in bankruptcy protection trying to execute its interim business plan.

What is that, you may ask. Hruska sums it up with these words, “Kodak is focused on growing four digital businesses: consumer/commercial inkjet printers, workflow software, and packaging solutions (photography plates). ”  Those seem little enough for a company that was once the giant of the photography industry.

He goes on to finish the thought:

Then, of course, there’s the lawsuits. Kodak is still trying to sell ~10% of its digital patent portfolio, but has wasted no time attempting to aggressively monetize the rest. The company re-sued Apple and HTC ten days back and, as of yesterday, has filed against Samsung as well. In the first two cases, Kodak has asked the ITC to suspend shipments of infringing products, while simultaneously hinting that what it really wants is a licensing deal.

“We’ve had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement,” Laura Quatela, Kodak’s COO said. “Our primary interest is not to disrupt the availability of any product but to obtain fair compensation for the unauthorized use of our technology.”

There’s the real meat of it. With the patent sale not likely to yield immediate results (a bankruptcy judge will have to approve any sale, and, frankly, few courts really understand intellectual property well enough to get through that exercise quickly), the lawsuits are Kodak’s best hope of raising money in the near term. Kodak is clearly hoping that the suits will inconvenience healthier companies enough to produce a licensing arrangement, and perhaps even demonstrate the value if its patents, as well.

Hruska closes his article with some well-chosen thoughts about Kodak’s situation:

The larger question is whether or not Kodak can ever attain anything like its previous status. Manufacturers like Lexmark and Epson may be profitable, but no one thinks of printer manufacturers as notable for anything but cramming ridiculous ink prices down the throats of consumers. Kodak’s brand strength and digital product portfolio may see it through this difficult era, but the “Kodak Moment” is likely over.

Hruska’s article is not really a comprehensive coverage of Kodak, the photography market, or the complex technology intellectual property marketplace. It is, however, a good coverage of the bankruptcy filing and will point you in the direction of some other questions to ask. I recommend it as a quick read.

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