Kodak faces bankruptcy

Kodak faces bankruptcy

The big news is that Kodak could be going out business.

Bloomberg reports that Kodak is seriously considering a bankruptcy filing because of concerns the company would have difficulty selling its patent portfolio because a purchase may amount to a so-called fraudulent transfer if Kodak is found to be insolvent.

The Wall Street Journal reports that Kodak has brought in restructuring experts who provide advice on all options from bankruptcy to raising new debt and equity. "The move to hire restructuring lawyers signals Kodak is intensifying efforts to ensure it has the financial wherewithal to complete a difficult strategic and financial revamp. Shares in the 131-year-old company have lost around a third of their value this week following Kodak's disclosure that it pulled $160 million from a credit line."

Kodak is a classic example of a company that failed to see the trends ahead. Kodak rolled out Kodachrome, the first commercially successful amateur color film, in 1935 and in 1981, its sales topped $10 billion. But it was overtaken by events. Most photos now are taken with phones and viewed on Facebook and nobody under the age of 20 has ever bought film.

So what went wrong at Kodak? It's very simple. As explained here, Kodak refused to embrace the digital revolution because it made the mistake of wanting to hold on to its model of selling both film and development. There are many other industries in similar positions. The newspaper game is the most obvious. Kodak won't be the first.


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