Graphic Evidence: Kodak Develops Buyout Thesis

Chart: Zignals.com

by Paul Springer

Sleepy trading in Eastman Kodak (EK) got a rude awakening from news that drove the company’s share up over 20% this morning.

MDB Capital Group prepared a report indicating that Kodak’s patents might be worth something like $3 billion, or about five times the business itself.

The move came a day after one critic questioned the value of the patents. “Kodak began using its patents to force tech companies such as Samsung and LG Electronics to cross-license its technology, but the nature of these deals means it needs to keep finding more companies to pursue,” The Motley Fool said.

Kodak was trading around $80 in the mid-1990s, but the onslaught of digital photography took its toll on Kodak and film imaging in general. It now trades around $2.50 a share.

Kodak has been trying to transition to new media for over a decade, taking steps such as laying off over 10,000 people in 2004, two years before Konica, Canon and Nikon got out of film technology. Polaroid closed its instant film business in 2008, and Kodak’s Kodachrome is pretty much history at this point.

Plenty of corporations have stockpiled cash that could drive mergers and acquisitions once people stop having their pants scared off by macroeconomic maelstroms. But why buy the whole company when you can just buy intellectual property (IP) assets you can just stick in a briefcase?

Bloomberg reports that a recent IP acquisition by Google triggered a closer look at Kodak’s IP paper:

The digital-imaging patents owned by Kodak may now be worth $3 billion in a sale, MDB Capital Group said, after Google Inc. (GOOG) paid a dot-com era premium to acquire Motorola Mobility Holdings Inc. and obtain its more than 17,000 patents to combat Apple Inc. (AAPL)’s iPhone.

Kodak is among a crew of other companies that might attract patent buyers, according to The New York Times:

Now other companies with large mobile patent portfolios, like Alcatel-Lucent,Kodak, Research in Motion and Nokia are being scrutinized as possible targets for licensing deals or full-on takeovers.

”The Motorola deal was a seismic event,” said Ronald S. Laurie, a former intellectual property lawyer who is now managing director of patent advisory firm Inflexion Point Strategy. Patents are now driving mergers and acquisitions, he said, “and that’s driving up valuations.”

Who could be next in the patent acquisition wars? See this MarketWatch video for Blackberry-picking thesis:

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