Can Kodak Save Itself -- or Is It Too Late Already?

Eastman Kodak (NYSE: EK  ) is clinging to life like a drowning sailor would cling to the last scrap of wreckage timber. But like Leo DiCaprio at the end of Titanic, I'm afraid it's all for naught -- the storied image technologist is still bound to slide into the icy waters of bankruptcy.

Let's leave the deck chairs alone on this sinking ship. This week's moves are more like laying out silverware for a last dinner.

Kodak's restructuring plan cuts out one underperforming business unit but keeps two others largely intact. COO Philip Faraci is effectively demoted by placing general counsel Laura Quatela on equal footing with him in the newly created chief operating office. Here we thought that management by committee was a terrible idea, as shown by the widely criticized co-CEOs of Research In Motion (Nasdaq: RIMM  ) , but Kodak feels differently. I still think that RIM needs to simplify its C-suite, and that Kodak's move is the exact opposite of "a new and simpler business structure," as the press release puts it.

But investors loved the announcement because Kodak invoked the magic words "digital company." If the board of directors had brought in top-notch outside talent to manage that transformation, I might have bought it. Instead, the executive compensation and development committee saw fit to promote from within. In other words, the committee is rewarding existing Kodak leaders for their utter failure to grok the digital age.

So Kodak's largest boardroom committee, led by online grocery store Fresh Direct CEO Richard Braddock, scores an epic fail where it really needed a Hail Mary touchdown. Why point fingers? Because investors deserve to know exactly who is sinking this ship. The board does get bonus points for taking action, but it's only drastic on the surface. Leo is still doomed.

Is this the Immaculate Reception?
Speaking of last-second desperation plays, Kodak also filed an International Trade Commission complaint against Apple (Nasdaq: AAPL  ) and Android gadgeteer HTC. Oh, yum! This complaint comes with a side of U.S. District Court lawsuits! They've tried litigation in the past against Apple, unsuccessfully.

According to Kodak, the smartphone makers are trampling on patents covering how devices preview and transmit images. "We've had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement," says Laura Quatela.

The company isn't interested in halting sales of iPads and Droid Xooms. No, Kodak just wants some money. Patents in this family have already been signed to royalty-bearing licenses with Motorola Mobility (NYSE: MMI  ) , Samsung, and Nokia (NYSE: NOK  ) . If their phones can carry the cost of a little Kodak license, why can't HTC and Apple pay their fair share?

Kodak says that more than 30 companies already pay royalties. Adding two more will obviously not turn the company's fortunes on a dime. Yes, Apple is big. So are Samsung and Motorola, and Nokia may be shrinking but it's still a leader in feature phones. They have cameras too, you know. In short, the proposed royalties simply cannot be large enough to make Apple investors shudder -- or to save Kodak's skin.

We've got a schedule to keep, son
If patents are supposed to save the day, the company would need to sell them wholesale. But the deadline for that move is approaching fast. Kodak has burned $900 million of free cash over the last four quarters and the fires are only burning faster. The balance sheet holds about one year's worth of cash destruction at this pace but then you also have $1.5 billion of debt with its roughly $150 million in annual interest payments to worry about.

Moreover, a group of hedge funds have slashed the cash reserves they'd be willing to offer Kodak as a last resort. The bony grip of bankruptcy moved just a little bit closer when that happened.

If the not-so-new management team has some secret ace up its sleeve, this would be the time to play it. Wait any longer and those juicy patents will be sold in bankruptcy auction for pennies on the dollar.

I give Kodak about six months to come up with its deus ex machina. After that, Leo succumbs to the icy waters of the North Atlantic.

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