Former photo giant Eastman Kodak saw bids for its digital
patents from Apple (NASDAQ:
AAPL
) and Google (NASDAQ:
GOOG
) come in way below Kodak's $2.6 billion estimation.
The auction between the two technology giants is now set for
Wednesday, according to the
Wall Street Journal
, and the two bids were between $150 million and $250 million.
How did Eastman Kodak came up with the astronomical estimation
in the first place? The company's name was once synonymous with
quality products in the photo and printing markets. It defined the
market, in fact. But the company's stubborn refusal (or inability)
to innovate as the digital age swept away film with a tidal wave of
technology has resulted in EK filing for Chapter 11 bankruptcy
protection on Thursday.
It is a spectacular fall from grace that seemed near-impossible
20 years ago. A lot has changed in two decades, and few people use
film anymore. Kodak has tried valiantly to keep up but these times
call for technological leaders, not followers. For that reason,
Kodak quickly grew to resemble an elderly gentleman trying to
figure out how to insert his cassette tape into an iPod.
It is difficult to pinpoint exactly what Kodak should have done
to survive. The problem for all companies in the camera market is
that in the digital age, we tend to not print out all of our
pictures. Rather, we keep them on the computer and just print out
the occasional one or two for framing. Even then, we tend to print
them out ourselves.
Therefore, consumers are no longer paying for a permanent train
of film and then development, instead choosing to just purchase the
occasional pack of photo quality paper and ink cartridges. That was
Kodak's problem. Once the hardware is purchased, there was little
in the way of recurring costs. Inevitably, the company caved.
Back in January, CEO Antonio Perez said in a statement that, "As
we complete Kodak's transformation to a digital company, our future
markets will be very different from our past, and we need to
organize ourselves in keeping with that evolution. This new
structure simplifies the organization, focuses it more precisely on
our consumer and commercial customers, and puts the right people in
place to capitalize fully on the tremendous technological
capabilities of Kodak. These business structure changes also allow
us to allocate resources more productively, continue to
significantly reduce administrative costs, and improve efficiency.
We are confident that these changes will support our efforts to
make the most of our opportunities."
Kodak is now aiming to emerge from Chapter 11 bankruptcy as a
printer maker, and that would be made difficult if it is forced to
sell its patents at such a lowball price.
"The auction process, including information about bids and the
identity of bidders, is confidential pursuant to an order of the
Bankruptcy Court," a Kodak spokesman told the WSJ. "Disclosure of
submitted bids or the identity of bidders would violate the court's
order, and Kodak believes that speculation about the details and
potential outcome of the auction is inappropriate."
Kodak is selling a total of 1,100 patents in two seperate lots.
The first lot includes patents related to capturing and processing
images, the second for storing and analyzing images.
Any money made from the patents must first go towards paying off
the banks. No wonder, then, that it is attempting to set the price
so high.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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