Kodak files for bankruptcy
One- time industry leader undone by Digital Age, analysts say
NEW YORK — Eastman Kodak Co, the photography icon that invented the handheld camera, has filed for bankruptcy protection and plans to shrink significantly, capping a prolonged plunge for one of America’s best- known companies.
The U. S. Chapter 11 filing makes Kodak one of the biggest corporate casualties of the digital age, after it failed to quickly embrace more modern technologies such as the digital camera, ironically, a product it invented.
Kodak once dominated its industry, and its film was the subject of a popular 1973 song, Kodachrome, by Paul Simon.
The bankruptcy may give Kodak, which traces its roots to 1880, the ability to find buyers for some of its 1,100 digital patents, a major portion of its value. Kodak employs 17,000 people worldwide, down from 63,900 just nine years ago.
“It is a very sad day even though we anticipated it,” said Shannon Cross, an analyst at Cross Research who has had a “sell” rating on the company since 2001. “If it emerges, it will be a much smaller entity.”
According to papers filed with the U. S. bankruptcy court in Manhattan, Kodak had about $ 5.1 billion of assets and $ 6.75 billion of liabilities at the end of September.
In court documents, Chief financial officer Antoinette Mccorvey said, without elaborating, that Kodak plans to sell “significant assets” during the bankruptcy. Non- U. S. units are not part of the Chapter 11 case.
Kodak also said it obtained a $ 950 million, 18- month credit line from Citigroup so it can keep operating and avoid liquidation. It said it expects to complete the bankruptcy process in 2013.
“This is a necessary step and the right thing to do for the future of Kodak,” chairman and CEO Antonio Perez said in a statement.
Kodak’s market value has sunk well below $ 200 million from $ 31 billion 15 years ago, when its share price topped $ 94. By the end of trading Thursday its shares were down six cents to 30 cents each.
In recent years, Perez has steered Kodak toward consumer and commercial printers but that failed to restore annual profitability, which Kodak has not seen since 2007, and did not arrest a cash drain.
Kodak has struggled to meet its pension and other obligations to more than 65,000 workers, retirees and others who participate in its employee benefit programs.
Mccorvey said Kodak ultimately suffered from a “liquidity shortfall” as some vendors stopped shipping and providing services, and demanded shorter payment terms.
Kodak said in court papers it has about $ 820 million of cash and equivalents, but was down to just $ 56.7 million of cash in the U. S.
“They got behind the curve on the analog- to- digital shift, and they were way behind for a long time,” said Ananda Baruah, an analyst at Brean Murray who covers Kodak.
The company’s downfall has also hit its Rust Belt hometown of Rochester, N. Y., with its workforce there falling to about 7,000 from more than 60,000 in Kodak’s heyday.
In the last few years, Kodak has used extensive litigation with rivals such as Apple, Research in Motion, Samsung Electronics over patents as a means to try to generate revenue.
According to Kodak, George Eastman, a high- school dropout from upstate New York, founded the company in 1880 and began making photographic plates. To get his business going, he splurged on a second- hand engine to make the plates for $ 125.
Within eight years, the Kodak name had been trademarked, and the company had introduced the hand- held camera as well as rolled film, where it became the dominant producer.
Eastman also introduced the “wage dividend,” in which the company would pay bonuses to employees based on results.
Kodak went on to create famous cameras such as the Brownie, launched in 1900 and sold for $ 1, and the Instamatic in 1963.
Not long after singer Paul Simon told his mama not to take his Kodachrome away, Kodak invented the digital camera.
The size of a toaster, it was too big for the pockets of amateur photographers, whose pockets now are stuffed with digital offerings from the likes of Canon, Casio and Nikon. But rather than develop the camera, Kodak put it on the back burner and spent years watching rivals take market share that it would never reclaim.