Attention: CEO Antonio Perez
Dear Kodak (EK) management,
Kodak is one of the greatest and most innovative companies of all time. Without Kodak, there would be no Apple (AAPL), no Google (GOOG), and no Facebook. Kodak not only transformed photography and film, but was also the catalyst that enabled most of the digital age of the past 100+ years. The technology world owes itself to you, Kodak.
I mean it. It’s not that I simply think Kodak deserves the recognition for changing the course of history, but Kodak actually has the power behind it to prove that it essentially owns much of the technology currently used by some of the largest and most profitable companies in the world – its tremendous portfolio of approximately 11,000 patents.
Kodak’s patents are worth billions of dollars, in my opinion a minimum of $5 billion. Their true value is even likely in the tens of billions. However, in order to get the most bang for the buck, whoever owns these patents must have the resources and network to use these patents and implement them in growing technologies. The sad fact is that Kodak simply cannot do much with its patents; it is sitting on a gold mine without the proper tools to dig and mine.
Imagine what giant, powerful, and growing companies like Apple (AAPL), Google (GOOG), Amazon (AMZN), Canon (CAJ), Sony (SNE), Xerox (XRX), Microsoft (MSFT), and others could do with Kodak’s patents. These companies could completely revolutionize technologies used in images, print, smartphones, movies, art, computers, web development, and just about any digital device. Apple could transform its iPhone and iPad; Google could transform its Google images, Android phones, etc.; Canon could completely dominate printing and copying.
The possibilities are endless. It is nearly impossible to truly predict the massive potential of the patent portfolio – it could spark new innovations, lead to new product development, allow individual companies to control a segment of the market, and even give the buying company a giant opportunity to profit from a future sale of this crucial intellectual property. Paying $4-10 billion for the entire portfolio could result in an additional $100 billion in the buying company’s market value.
I understand your situation, Kodak. It is so hard to just give up on a company with so much history, or to give in to the pressures from a rapidly changing business and financial world. For the past few decades, Kodak has seen its shareholder value nearly collapse, its business nearly fail, and its growth prospects nearly disappear. Kodak is essentially a non-competitor in almost every field it is currently involved. The only bright spot is its printing business, where it continues to see growth, and where management thinks the company could stage a comeback.
CEO Perez and management, I truly empathize with you and your tough circumstances. However, after giving it some great thought, scoping the current business environment, and projecting what your best decisions should be from here, I will explain to you why selling your company will maximize shareholder value, make the most of your patent portfolio (which could revolutionize the technology world), and put you in history as the facilitators of the next Technology Age.
Five Reasons Kodak Management Must Sell The Company
1. Massive Patent Potential Wasted. Kodak has collapsed from a dominant, multibillion-dollar company to a failing, soon-to-vanish company with a tiny $300 million market cap. The market is pricing in bankruptcy, based on Kodak’s growth potential. However, management and I know that the patent portfolio is worth so much more than that.
At the same time, however, Kodak has no chance to fully utilize its massive and powerful patent portfolio, since it has no resources, no cash to spend, no large network of customers, and no technology team capable of developing and implementing these patents into a multibillion-dollar business. On the other hand, these patents could offer a larger, growing company a huge opportunity to further develop Kodak’s ideas, products, and revolutionary history – with the money required to expand and grow, and with the network, partnerships, and public exposure necessary to monetize them. These are cash cows for any company that buys them.
2. Company Not Recovering Fast Enough. After a bunch of years of declining and on its way to bankruptcy, Kodak simply is not recovering or growing fast enough to make the recovery attempt favorable. Management has attempted to license its patents, cut out failing business segments, and focus on printing – which it thinks is the way to recovery. But while management has worked very hard in reviving Kodak, all the losses and cash-burn make the attempt essentially futile; without massive changes and lots of help, reviving Kodak is a lot of wasted effort. Why try to recover a $300 million company when you can sell it for $5 billion+ and allow a powerful and strategic company to fully utilize Kodak’s potential?
3. Maximize Shareholder Value. By selling the company for $5 billion+, shareholders will be tremendously and fairly compensated for their faith in Kodak and the risk they have taken on by owning the stock. Many shareholders who have owned your stock at any point over the past 15 years are down over 90 percent. One of your duties as CEO or management of a public company is to maximize shareholder value. Your best way to do that right now, and prevent a bankruptcy, is to sell the company and allow a larger company to properly help Kodak grow. Selling Kodak will make up for the shareholder loss, help you properly do your job, and would give a larger company (with the resources to back it up) a gold mine of opportunity to expand and develop your technologies.
4. Teaming Up Will Revive Kodak Brand. Kodak has been a household name for over 100 years, and its name still holds considerable value. Case in point – a Kodak billboard is still a fixture in Times Square, and people still remember the “Kodak” name. However, if Kodak does not stage a massive comeback in the near-term, the “Kodak” name could disappear forever. Kodak is so close to being irrelevant that failing to team up with a larger, more powerful company could seal its fate as a huge failure.
Instead, Kodak’s ability to sell itself to a large and powerful company with growing businesses and products would help the Kodak name continue and even grow, as Kodak-brand technologies are developed and mass-produced under the wing of a dominant and competitive company like Apple, Google, or others. Selling Kodak will not end the Kodak story; on the contrary, selling Kodak will allow the Kodak name to continue to grow, continue to be developed, and continue to transform the technology world – with the financial help and capabilities of a much more powerful company.
5. Allow Technology to Advance. Kodak is sitting on a portfolio of tremendously powerful patents without using them. Since it is such a small company with large debt and no resources to fully capitalize on all of its opportunities, it is essentially preventing technology from advancing to the extent that it could. By selling the company together with the patents, technology will advance to such a great extent that Kodak’s contribution to these new innovations and products will help mark the next Technology Age. Management’s decision to sell the company will revive the Kodak brand, maximize the use of its extremely important patents, maximize shareholder value, and allow technology to advance to an unprecedented level – a role Kodak was known for and was founded on.
Management, please do what’s best for you, your shareholders, your company, and the advancement of technology. Selling Kodak for $5 billion to 10 billion is your best choice by far.
Disclosure: I am long EK. Chart Prophet Capital is long EK through call options.