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Investing in Kodak During Bankruptcy

The 131 year old company that invented the personal camera has filed for bankruptcy. For the astute investor it might just be time to consider investing in Kodak during bankruptcy proceedings. As the picture taking world has moved to digital Kodak has had problems keeping up. Even before this foreign companies like Fuji were undercutting the price of Kodak film and cutting into its profit margins. The company is running on credit and running out of that so it has filed for protection while undergoing restructuring. For the individual interested in investing in Kodak during bankruptcy there are a couple of useful things to think about. Like Motorola, this old company has a very large number of patents. In fact, Eastman Kodak has a large number of patents in the digital realm. As in all stock investing a little background is important.

When Kodak decided to catch up in the digital imaging business it eventually filed over a thousand patents. If you are investing in Kodak during bankruptcy you will be largely investing in the value of these patents. Some of them Kodak is selling the rights to and with some of them it is suing to enforce its patent rights. Kodak has already won a lawsuit against LG and has filed patent suits against Apple, Blackberry, RIM, and HTC. As the company states, it could win significant royalty payments if all of the lawsuits work out in its favor. On the other hand Kodak needs to cut its costs and increase its sales of new and old products in order to thrive in the years to come. For one of the old time dividend stocks this is brand new day. This brings up the issue of whether it might be wise to invest in Kodak during bankruptcy only for the short term or long term as well.

Fundamental analysis of Kodak could include some of the following. If Kodak gains significant royalty payments and improves its business picture it could be a great long term play at a currently low price. On the other hand the stock price could pop up with new royalty payments only to languish again if the company cannot reshape itself and regain profits. Kodak has not invested in its traditional film business for eight years. Nevertheless it still sells film. The company has offshore subsidiaries which are not included in the bankruptcy proceedings. The company has about five billion in assets and almost seven billion in debts. Although Kodak has moved into the business of making ink jet printers for both personal and commercial/industrial use it has yet to profit from this business segment. For someone to invest in Kodak during bankruptcy and turn a long term profit Kodak needs to make at least one of its business segments profitable. An attractive aspect of reorganization, for Kodak, would be to reduce its pension fund obligations. This old company has many retired employees and the sum of its pension obligations runs to a quarter of a billion dollars a year. This could be substantially reduced in bankruptcy proceedings. In addition, Kodak is expected to split its business into consumer and commercial parts, making it easier to sell one or both.

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