August 20, 2012
A week ago today we were expecting to hear the results of the court-ordered sale of Eastman Kodak's 1,100 digital imaging patents. On Monday August 13th, the winning bids were to have been announced. Over the preceding weekend the Wall Street Journal had reported a disappointing bidding process that had produced far less than the expected $2+ billion. As 5 pm came and went it became obvious that we wouldn't be hearing anything that day. Observers began to assess what had happened and might happen next.
First thought: good news! After all, auctions can stay alive when bidders, goaded by the auctioneer, raise their bids and battle for success. Perhaps the bidders, primarily consortiums run by Google on one side and by Apple and Microsoft on the other, were finally stepping up to offer big bucks. But as the week wore on with no word, it seemed less likely that a bidding war was at the heart of the delay. Word from Kodak was that the company "had not reached a determination or agreement to sell the digital imaging patent portfolio" and that they might "instead retain all or parts of it." For the last year, Kodak has been talking about selling these patents, and using the projected $2 billion ("more," went some whispers) to pay its creditors and emerge from bankruptcy. Now their plan is to retain them? Sure, who needs cash? We'll just keep these patents. But Kodak needs to pay its creditors in cash, not intellectual property. Without the financial muscle to commercialize the patents themselves, and with a declining revenue stream from patent licensing, the question for Kodak is: what now?
The patent sale misfire seems to be yet another bad call by CEO Antonio Perez, who has been with Kodak since being named company President in 2003. We're not privy to what's happening on the top floors of 343 State Street. But there is an objective measure of how Kodak's CEO has performed since assuming the top job there 7 years ago. The value of a company's common stock and the amount of cash dividends paid to shareholders are the report cards of the CEO. With Kodak's stock now changing hands at less than 20 cents/share and no cash dividends in the last 4 years, this CEO's grade is F. Kodak still has business generating billions in sales. Maybe what they need is a leader who can run those businesses.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).