Ceased Moment for Kodak - Analyst Blog


Shutterstock photo

Recently, Eastman Kodak Co. ( EK ) filed for Chapter 11 bankruptcy protection with the U.S. bankruptcy court in Manhattan; capping a prolonged plunge for one of America's best-known companies.

According to papers filed with the U.S. bankruptcy court, Kodak had about $5.1 billion of assets and $6.75 billion of liabilities at the end of September 2011. The Chapter 11 filing makes Kodak one of the biggest corporate casualties of the digital age. Kodak has planned to sell "significant assets" during the bankruptcy and expects to complete its U.S. restructuring in 2013. The bankruptcy will now allow the company to find buyers for some of its 1,100 digital patents, which is a major portion of its value.

Over time, Eastman Kodak Co, the photography icon since 1880, has been pursuing its invention roadway, the analog to digital shift-starting from the pioneer hand-held camera till the modern age digital technology. However, the market value recently sunk below $100 million from $31 billion 15 years ago with employment down to 17,000 people worldwide from 63,900 just nine years ago. Kodak also reported that $820 million of cash and equivalents was presently down to just $56.7 million of cash in the United States. The downfall has hit Kodak's Rust Belt hometown of Rochester, New York, with its workforce falling to about 7,000 from more than 60,000 in U.S.

The inevitable bankruptcy portrays one of the worst cases of the company's failure to restore annual profitability since 2007 and arrest cash drain. Kodak suffered from a "liquidity shortfall" as some of the vendors stopped shipping and providing services, and demanded shorter payment terms. It struggled to meet the requisites like pension and other obligations of more than 65,000 workers, retirees and others, who participate in its employee benefit programs. The final downfall, however, began in September 2011 when the company unexpectedly withdrew $160 million from a credit line, raising worries of a cash shortage.

The court hearing on Thursday,  granted Kodak, the interim approval from U.S. Bankruptcy Judge Allan Gropper to obtain up to $650 million of debtor-in-possession financing led by Citigroup Inc. ( C ). The financing, though less than the amount Kodak had sought, looks fair enough to keep Kodak in operation while avoiding liquidity. A hearing for final approval has been set for February 15.

Kodak recently reorganized its business operations, creating a commercial unit and a consumer unit dissolving the previously held units for consumer digital imaging, such as film, photofinishing and entertainment; and graphic communications. Moreover, patent litigation has been a major part of Kodak's recent efforts to generate revenue of late. Kodak recently sued Apple Inc. ( AAPL ), Research in Motion Ltd ( RIMM ) and HTC Corporation over alleged violations. However, these companies have denied infringing Kodak patents; while Apple filed a limited objection in the bankruptcy case to preserve its rights in patent litigation.

This is going to be a tough; to unwind the 130 years of history of "Kodak Moment" providing imaging technology products and services to the photographic and graphic communications markets across the globe. The company leaves the competition platform, which it shared with its peers such as Canon Inc . ( CAJ ), Sony Corporation ( SNE ) and FUJIFILM Holdings Corporation.

APPLE INC ( AAPL ): Free Stock Analysis Report
CITIGROUP INC ( C ): Free Stock Analysis Report
CANON INC ADR ( CAJ ): Free Stock Analysis Report
RESEARCH IN MOT ( RIMM ): Free Stock Analysis Report
SONY CORP ADR ( SNE ): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: AAPL , C , CAJ , RIMM , SNE

More from Zacks.com




Equity Research
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com