Kodak files for bankruptcy

The company says it has new financing and can continue operating while it restructures.

By Kim Peterson Jan 19, 2012 2:27AM
Image: Woman with camera (© Corbis)It's the end of an era for Eastman Kodak. The legendary American company said early Thursday it has filed for Chapter 11 bankruptcy protection, unable to shore up the cash it needs to continue operating.

The stock has been delisted from the New York Stock Exchange. Its shares were falling in over-the-counter trading Thursday under the new symbol EKDKQ.

The 131-year-old company had been trying desperately to sell its huge collection of digital-imaging patents, saying it needed the money to survive. The company's future essentially hinged on that sale. If it didn't come through -- and it looks like it didn't -- bankruptcy was all but assured.

Kodak will now reorganize its business in hopes of bolstering its liquidity and settling some longstanding liabilities. The company wants to focus on its most valuable business lines and expects to complete the restructuring in 2013. About 75% of its revenue last year was from its digital businesses.

Kodak says it has enough money to keep operating during the bankruptcy and emphasizes that it will continue offering products and services. Employees will still be paid. The company has obtained $950 million in financing from Citigroup (C) with an 18-month maturity date.

One of Kodak's biggest problems was that it held stubbornly to its legacy film businesses and waited too long to embrace digital technology. The company has finally come around, and it wants to continue that digital push. It has begun closing manufacturing plants and film processing labs, finally saying goodbye to the traditional operations that were no longer profitable.

After trying unsuccessfully to profit from digital cameras and online photo-sharing tools like EasyShare, Kodak now sees its future in the printer business, both in home photo printers and commercial high-speed presses. Kodak is pouring money into the business in hopes of making it successful. Its digital-imaging unit lost $90 million in the third quarter.

It sounds like the company will continue to push into printers. "Kodak is taking a significant step toward enabling our enterprise to complete its transformation," CEO Antonio Perez said.

He added that bankruptcy offers the best way to maximize the value of two assets in particular: the company's digital-capture patents, which still bring in significant licensing revenue, and its printing and deposition technologies.

Kodak shares were above $5 just a year ago. But investors lost faith as uncertainty continued to hover over the company. Could Kodak find a way to profit in the digital age? What happens as smartphone cameras increasingly replace traditional ones? Could Kodak beat back the threats from Apple (AAPL), Microsoft (MSFT), Google (GOOG) and others making headway into digital images? (Microsoft owns and publishes Top Stocks, an MSN Money site.)

As rumors of bankruptcy surfaced, shares fell below $1. But recently investors had been more optimistic. Tuesday, the stock rose 4.5% to 55 cents and 6.4% in after-hours trading.

Common shareholders will likely lose the value of their shares in bankruptcy.

Kodak was born when George Eastman, a high school dropout who worked to help his struggling family, became absorbed in photography in the late 19th century. He experimented with gelatin emulsions for three years, inventing a formula for dry-plate photography and a machine that could prepare large numbers of plates, the company said.

Eastman set out to make photography easy for everyday users. He devised new coatings for photography paper. He came up with ways to roll paper film in a holder. He coined the name Kodak and trademarked it in 1888.

The innovations continued. The debut of Kodachrome film in 1935 changed the industry. By 1988, the company employed nearly 150,000 people. Kodak became an industrial giant, and its stock was a reliable winner for decades.

13Comments
Jan 19, 2012 9:20AM
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I don't think it is the end of KODAK. Many companies filed bankruptcy and than years later they re-erected from their ashes. I wish good luck to KODAK...!
Jan 19, 2012 10:05AM
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I wish them all the luck...

Was a good AMERICAN company for years, and provided

jobs for thousands of Americans

Jan 19, 2012 10:11AM
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Sure path to business disaster, have a large stake in a declining, obsolete product, Blockbuster perfected this strategy also....
Jan 19, 2012 10:25AM
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My Kodak printer  has been the best buy in  20 years , only paid $ 50.00 for it new I have had other printers  that died an early death . I use  generic ink cartridges  for my Kodak  printer  and am happy with the lower cost of ink it uses .
Jan 19, 2012 10:34AM
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Shame on Kodak for allowing themselves to get in this position. Eastman had vision and most definitely he would have have pioneered and led the digital age transformation, his successors lacked that ability and survived just by living off of the name while the market was changing around them. Kodak printers are low quality and their easy share software tool is so awful I uninstalled it after one day of installing it when it came with my digital camera purchase. I hope they clean house along with the reorganization and put some leaders in there who have a vision. I don't honestly see them being a significant printer player and besides that market is already saturated.

Jan 19, 2012 9:56AM
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Companies need to either evolve, or die.  It is nature.
Jan 19, 2012 10:38AM
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Like every thing else changes, modernism is in and the old is out. We can only be thankful for the services enjoyed through the years with film pictures. Adapting to digital photography, I'm not sure how flexible this compare to films, except lighting situations is better with the digital. I will missed kodak film and hope it still be available for usage.  
Jan 19, 2012 10:09AM
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I wish them the best of luck but geez, I'm not in their business and I could see this coming from a mile away!
Jan 19, 2012 12:36PM
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It's sad to see this former great company going down. They actually built the very first digital camera back in the early 70s. Too bad they didn't realize what they had back then. I bet George Eastman would have!!!
I don't know what it is about Rochester NY. We have all these Fortune 500 companies start here and then they leave or go belly up. (Kodak, Xerox, Champion Products, Gannett Newsgroup, Baush and Lomb. I could go on and on.)

Jan 19, 2012 11:19AM
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I went to work for Eastman Kodak back in the late 80's.  Soon afterwards (1994), a new company was formed by spinning off from EK.  That company became Eastman Chemical Company and became a separate entity from EK.  The company site I was employed at became a part of Eastman Chemical (EMN),  and I remember many people questioning why would anyone want to separate from an industry giant such as Eastman Kodak and form a new company.  I guess now we know why.......somewhat......but what I can't understand is this:  Eastman Kodak is a GLOBAL company with sites all over the world and with many diverse, smart, and innovative people with great ideas working for it.  Seems to me that they should have been a leader in the digital-age.  How did this industry giant lag behind?  Whatever the case may be, I don't believe this is it for EK.  They have too many resources (people, ideas, etc.) to just fade away in the sunset.  
Jan 19, 2012 10:13PM
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I have spent over a half million dollars with Kodak for wonderful film, paper & chemicals, but I got out of the photo-finishing fifteen years ago when I saw the digital revolution coming. I am still in the photography business, but I don't use any Kodak products anymore. EK was just too slow to adapt to the new technologies that they invented.

GM seems to be turning themselves around, maybe Kodak can too. But I'm afraid they have been too slow and made too many mistakes. Who knows?

Jan 19, 2012 10:03AM
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Their printers are garbage and their low cost ink is a criminal lie.  Worst printer ever and the ink cartages are nearly empty.  Don't waste your money on their products.
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