Sep. 14, 2012 at 1:28 PM ET
Kodak may abandon efforts to auction off its portfolio of digital imaging patents, the company said Friday.
The 131-year-old photography pioneer said it could instead set up a new licensing company to help repay creditors in its bankruptcy case.
Kodak filed for bankruptcy in January after struggling for years to adapt to the industry's shift to digital photography. The company has cut its workforce by about 2,700 employees worldwide since then.
On Monday it announced plans to cut a further 1,000 jobs by the end of 2012 and is looking at further job cuts as it works to restructure its business.
Kodak’s roughly 1,100 patents, which the company estimates are worth as much as $2.6 billion, have been central to its plan to repay creditors as it restructures its business in bankruptcy and shifts its focus from photography to commercial packaging and printing services.
However, published reports say Kodak received bids for the patents that were far lower than what it had hoped.
Analysts say Kodak’s turnaround strategy stands a good chance of success. Commercial printing technology makes up around 75 percent of Kodak’s business now, and it’s an area from which the company could potentially capture a lot of revenue.
A filing with the U.S. bankruptcy court in Manhattan says Kodak will delay “until further notice” a hearing scheduled for Sept. 19 on the sale of its patents.
Still, Kodak will continue to talk with its affiliates about selling the patents, and will also continue “to explore other alternatives with respect to the digital imaging patent assets, and their intellectual property more broadly, and may not reach acceptable terms with parties via the auction process,” according to the filing.
In the event a transaction does not take place Kodak said it will create a licensing company for the patents “as a source of recovery for creditors.”
Another option for Kodak is to issue its creditors with equity in a reorganized Kodak in exchange for the debt they held in the old one, according to Mark Kaufman, an investment consultant at MLK Investment Management. As long as a company can demonstrate operating profitability, this is often an option for creditors, he added, noting that in many reorganizations creditors receive equity in lieu of their debt.
“Everybody thinks creditors always need to get paid back in these instances, but they often get equity,” he said. “It’s rare for large corporations to be liquidated. They have to be hopelessly insolvent for that.”
Reuters contributed to this report.