Kodak Files for Bankruptcy, Retailers Unconcerned
Kodak’s slow slide toward bankruptcy cushioned the impact on CE retailers, many of whom long ago switched to its camera rivals, but the brand’s image lingers with consumers, retailers we polled said. Most CE retailers carry only a handful of Kodak point-and-shoot and digital SLR cameras along with printers, filling their shelves with similarly featured products from Canon, Nikon, Samsung, Sony and others. But the brand will remain valuable regardless of the type of company that emerges from the bankruptcy protection that Kodak sought on Wednesday, retailers said.
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"The name is still good and whether it’s Kodak” or some other company that sells products with its brand on it, consumers will still be interested, BrandsMart President Michael Perlman said. However, for CE retailers, Kodak “right now is a non-entity” with limited appeal because there are other suppliers selling similarly featured products at the same prices, Perlman said.
"There are lots of other credible brands that sell products with similar features so should they choose to get out of the digital camera business it wouldn’t have significant impact,” said Rick Souder, executive vice president of merchandising at Crutchfield.
In its bankruptcy filing, Kodak listed $5.1 billion in assets and $6.7 billion in debt as of Sept. 30, with The Bank of New York Mellon being the top creditor, with unsecured claims of $406 million and $252.1 million tied to 7 percent and 7.25 percent senior convertible notes due in 2017 and 2013, the company said. Other top creditors include Sony Studios ($16.6 million), Warner Brothers ($14.1 million), Nokia ($12 million), contract manufacturer Primax Electronics ($11.5 million), Walmart ($11.4 million), Target ($9 million), Best Buy ($8.3 million), Officemax ($4.6 million), printer supplier Flextronics ($3.4 million), Staples ($3.1 million), Amazon ($3 million) and Matsushita ($2.2 million).
Kodak was hampered for much of 2011 with rumors of looming bankruptcy, much of it tied to the company’s struggles to raise money. It cut from its lineup some digital cameras and pulled back distribution in some regions in an effort to make the consumer digital business successful, which incurred $150-$170 million in restructuring charges. Kodak also put 1,100 digital imaging patents up for sale in November in what many analysts viewed as a last ditch attempt to avoid bankruptcy (CED Nov 4 p6). Kodak also had forecast selling $200 million in non-core assets, while widening the projected annual loss from continuing operations to $400-$600 million from $200-$400 million. Kodak’s licensing revenue dried up in 2011. Kodak’s digital capture patent portfolio generated $3 billion in licensing revenue between 2003-2010, but declined to $98 million last year, Kodak said. Kodak has not hesitated to enforce its patents, landing a $550 million settlement with Samsung after suing the company for allegedly infringing patents covering digital cameras in cellphones. It has similar suits pending against Apple and Research in Motion, and sued Samsung a second time, this time alleging the company’s Gallery tablet infringes its patents. Despite some settlements, Kodak’s liquidity “has been further impaired” by difficulties in collecting license fees from companies that are allegedly infringing patents, Kodak said. The infringing companies have “employed a strategy of delay in light of Kodak’s liquidity position, and by substantial foreign and U.S. legacy costs,” the company said.
Kodak also sought to raise funds by selling $4 billion in assets and businesses starting in 2003. The sales included those of Kodak’s health group, image sensor solutions, remote sensing systems and chemical operations, Kodak said. Kodak also sold its OLED-related assets to LG Display for $400 million, a business it once forecast to produce $500 million in annual revenue by 2005 (CED Sept 26/03 p3). Kodak owned some of the original OLED patents. Kodak owns 8,900 U.S. patents and trademark registrations and another 13,100 in about 160 countries, the company said. It filed another 590 U.S. patent applications in 2011, the company said. Kodak also signed a licensing agreement last fall with Imax for its optical block design for laser projectors for digital cinemas. Kodak sought to bolster its finances last year in issuing $250 million in senior secured notes due 2019. The senior notes are part of Kodak’s total $1.6 billion in outstanding funded debt.
In addition to selling assets, Kodak also has undergone a series of restructurings that slashed its workforce to 17,000 employees in 2011 from 63,900 in 2003, the company said. At the start of this year, Kodak split itself into commercial and consumer businesses. Kodak’s previous structure included graphic communications, consumer digital imaging and film, photofinishing and entertainment groups. Digital products accounted for about 70 percent of Kodak’s $4.5 billion in sales in 2011, which was down from $13.3 billion in 2003, the company said. Sales of consumer digital imaging products, including retail photo kiosks, cameras, inkjet printers, video recorders and the Kodak Gallery online photo-sharing service, accounted for 29 percent of Kodak’s 2011 revenue, the company said. Graphic communications, which feature high-speed commercial inkjet printing, were 45 percent of total sales, the company said.
To speed Kodak’s revamping, the company is said to be poised to appoint a chief restructuring officer. While the Kodak board hasn’t made a final decision, Dominic Di Napoli, a vice chairman at FTI Consulting, is among those being considered for the post, the Wall Street Journal reported. Hiring a chief restructuring officer would make it easier for Kodak to line up investors for a loan, the newspaper reported. Kodak hired FTI last year as it weighed plans for shoring up its finances. Antonio Perez is expected to remain Kodak’s CEO and chairman, analysts said.