Better Yet, Take A Picture Of Me With A Kodak (Patent That Is)

According to the Wall Street Journal, Eastman Kodak Company (NYSE: EK) is thinking of selling one of the most important parts of its company: the patent for previewing photographs. This is incredibly important because this is the same patent that has Kodak currently involved in litigation with Apple Inc. (NASDAQ: AAPL) and Research In Motion Ltd. (NASDAQ: RIMM).According to the article, Kodak is considering the sale of 1,100 patents, or 10% of the company's portfolio. Included in the group of patents are those used for covered capturing, storing, organizing and sharing digital images. Also involved in the potential sale is a patent that Kodak has which is currently being litigated against Shutterfly, Inc. (NASDAQ: SFLY).Kodak has used the patent that it is currently litigating against Apple and RIMM to generate hundreds of millions in revenue from licensing, but it has seen income from patent litigation dry up, and the company is losing money hand over fist."The patents are part of the 1,100 but not necessarily part of any future deal simply because we are so early in the process," said Kodak spokesman Gerard Meuchner.Kodak's decision to sell its patents comes after Nortel sold its patent portfolio for $4.5 billion to a group led by Apple and RIMM, and renewed interest in companies like InterDigital, Inc. (NASDAQ: IDCC). At just $625 million, Kodak is heavily dependent on its image-preview patent to help fund its consumer and commercial printers businesses, to help offset declining film sales. The company is so small that it put in a poison pill to help prevent it from a takeover, due to the small size of the company. For years, Kodak was synonymous with taking pictures, memories, and even attracted celebrities like Bill Cosby to hawk their products. Now, time has passed it by, and the only thing you may be able to do is snap a photo using your iPhone or Blackberry to take a memory of the once great company Kodak was.ACTION ITEMS:

Bullish:
Traders who believe that Kodak will be able to sell its patent portfolio for high returns might want to consider the following trades:

• After seeing what Nortel got for its patent portfolio and the hullabaloo over InterDigital, Kodak may be able to generate $1 billion or more for this group of patents. That could be a serious boost to shares if Kodak receives that much, considering the company itself is only worth $625 million.

Bearish:
Traders who believe that Kodak will fail may consider alternate positions:

• Short Kodak. At $625 million, there is not much left to this company, with shares trading well below $3 per share. Kodak has been losing money left and right and this really is the company's last shot to make any money before a potential bankruptcy comes into play.

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