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Kodak faces tough choices in bankruptcy, experts say

Published Jan. 21, 2012

CHICAGO — Even in bankruptcy, Kodak boasts some enviable strengths: a golden brand, technology firepower that includes a rich collection of photo patents, and more than $4 billion in annual sales of digital cameras, printers and inks.

But all that may not be enough to revive its declining fortunes in a Chapter 11 overhaul. Kodak is at a crossroads: It could go the way of fallen Montgomery Ward and Circuit City, which never recovered from long declines. Or Kodak could prosper after bankruptcy, as General Motors has.

None of the restructuring experts interviewed by the Associated Press seemed optimistic that Kodak will make a strong comeback. Selling select business lines and patents and making the right bets on a limited number of new technology products could allow the Eastman Kodak Co. to survive, several experts said. But none envisioned a path back to anything close to the glory days of the former photography titan.

"The Kodak as we know it is done, unequivocally," said Bill Brandt, chief executive of turnaround consultant Development Specialists in Chicago.

The company's only hope, Brandt said, is to reinvent itself as an intellectual property company. But first it would have to put its patents up for sale and determine whether it wants to sell them based on what's offered, he said, or retain them and try to remake the company over a period of years.

Kodak said only that it has appointed a chief restructuring officer to head the effort: Dominic DiNapoli, vice president of FTI Consulting.

Some experts think the company can get by once it cuts debt by reducing pension and employee benefit costs in bankruptcy, then disposes of its least valuable products.

Only a much leaner, more focused Kodak can survive, said Haresh Sapra, an accounting professor and bankruptcy specialist at the University of Chicago Booth School of Business. He said Kodak "probably should go back to basics and focus on one or two of those business lines that are self-sustaining."

The primary hope lies in digital businesses that generated some $4.5 billion in revenue last year, an amount Kodak said accounted for about 75 percent of total sales. That includes consumer devices such as self-service photo kiosks, printers and high-volume document scanners.

"If they can take their existing products and improve them and make them much cheaper, I see no reason why the company can't emerge with a healthier balance sheet," said Edward Neiger, a partner at New York bankruptcy law firm Neiger LLP. "It's going to be a shell of what the old company was, but I don't think they need to liquidate."

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