Kodak Explores Options for Imaging Patent Portfolio

Eastman Kodak Co. (EK), the 131-year-old camera company, may sell more than 1,100 digital-imaging patents to raise money for operations amid a booming market for intellectual property.

The company is exploring alternatives for its portfolio, which includes patents for processing, editing and storing digital images, Rochester, New York-based Kodak said today in a statement. They represent 10 percent of Kodak’s total U.S. patent portfolio, the company said.

Kodak’s patents may be worth $2 billion or more and could attract bids from Apple Inc. (AAPL), Samsung Electronics Co. and LG Electronics, Mark Kaufman, an analyst at Rafferty Capital Markets LLC in New York, said today in an interview. Kodak, which has been trying to drum up royalties from its digital- imaging patents to fund a shift to accessories and printers, has a total market value of $634.9 million.

“If you are a large consumer electronics manufacturer, you’ve got to sit up and take notice,” said Kaufman, who has a “buy” rating on the shares. “The patents are for cameras, and as a manufacturer you’re not going to the market today with a smartphone without a camera.”

Demand for intellectual property has been advancing. Last month, a group including Apple, Microsoft Corp. (MSFT) and Research in Motion Ltd. agreed to pay $4.5 billion for a patent portfolio from Nortel Networks Corp, outbidding Google Inc. for the rights to technologies for mobile phones and tablet computers.

Patent Infringing

Kodak rose 5 cents, or 2.2 percent, to $2.36 at 1:29 p.m. in New York Stock Exchange composite trading. The shares had plunged 57 percent this year before today.

David Lanzillo, a spokesman for Kodak, declined to comment beyond the statement. Steve Dowling, a spokesman for Cupertino, California-based Apple, and Adam Yates, a spokesman for Samsung, didn’t immediately respond to telephone calls or e-mails seeking comment. John Taylor, a spokesman for Seoul-based LG, declined to comment.

Earlier this month, the U.S. International Trade Commission failed to reach consensus on Kodak’s claims that Apple and Research in Motion infringe its image-preview technology. It was the second delay by the Washington-based agency in a case from which Kodak aims to extract $1 billion in licensing fees from Apple and RIM. Apple and RIM deny infringing the patent.

“The ITC process is taking longer than it should have so they are looking to get started a competitive bidding process for the whole portfolio,” said Kaufman. “The company needs money,” he said.

‘Heightened Demand’

Kodak said today that there is “heightened market demand for intellectual property,” according to the statement. The company hired Lazard Ltd. as an adviser.

Chief Executive Officer Antonio Perez, who has led the company since 2005, has said he is using proceeds from intellectual property licensing to invest in the company’s inkjet printing, packaging and software units to blunt falling revenue from camera film.

Those businesses, with about $1 billion in 2010 sales, may grow by as much as 40 percent in 2011 and generate operating income during the next two years, Kaufman said.

Analysts project Kodak will generate revenue of $6.17 billion in 2011, a decline of 14 percent from 2010.

Kodak, which traces its roots to 1880, was founded by George Eastman, who developed a method for dry-plate photography and introduced the Kodak camera in 1888, according to the company’s website.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.

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