Reports: Eastman Kodak Delays Patent Sale Results As Bids Come In Very Low

Kodak Reaches Settlement With U.K. Pension Plan; To Spin-Off Imaging Units

Eastman Kodak FY12 Loss Widens

8/13/2012 11:06 PM ET

Beleaguered photographic equipment maker Eastman Kodak Co. (EKDKQ: Quote) has delayed announcing the wining bidder of an auction to sell its digital imaging patents as bids came in too low, according to media reports on Monday. The auction process began in early August, and the company was expected to announce the winning bidder earlier in the day according to the deadline set by the bankruptcy court. The company is still continuing discussions with bidders.

The news sent the company shares plummeting more than 34 percent in late deals on Monday.

The portfolio of digital imaging patents are valued between $2.2 billion and $2.6 billion. However, the initial bids from two potential buyer groups, each reportedly led by Apple, Inc. (AAPL: Quote) and Google, Inc. (GOOG: Quote), are said to have come in between $150 million and $250 million.

The Rochester, New York-based, 131-year-old company has been struggling to sell its non-core assets to stay afloat and to transform itself into a digital company from being a film photography company.

The bankruptcy court gave Kodak approval to go ahead with an auction to sell its digital imaging patents in early July. It had sought approval for bidding procedures in mid-May for a bankruptcy auction of its Digital Capture and Kodak Imaging Systems and Services or KISS, patent portfolios, comprising more than 1,100 patents.

The portfolio includes U.S. patents pertaining to capturing, processing, storing, organizing, editing, and sharing digital images, as well as imaging monetization applications.

The proceeds from the patent sale will be used to repay banks including Citigroup, Inc (C: Quote), which provided a $950 million bankruptcy loan as well as bondholders who are owed about $750 million.

The bidding could reach a crescendo when the two bidding groups participate in the auction to be held on Wednesday. Last year, a consortium led by Apple and Microsoft Corp. (MSFT: Quote) had snapped up Nortel Networks Inc.'s patents at an high of $4.5 billion after an initial bid from Google was only $900 million.

This time around also Apple is said to have teamed up with Microsoft, along with patent aggregation firm Intellectual Ventures Management LLC. The Google consortium reportedly includes Samsung Electronics Co. (SSNLF), LG Electronics, Inc. (LGERF.PK), HTC Corp. (HTCKF) and patent aggregation firm RPX Corp. (RPXC: Quote).

Kodak has been trying to sell the patent portfolio since July 2011, but those efforts failed amid rumors of the impending bankruptcy filing. Kodak has already licensed out its projector patents and sold its image sensor unit to generate cash.

Eastman Kodak and its U.S. subsidiaries filed voluntary petitions for chapter 11 business reorganization in the U.S. Bankruptcy Court for the Southern District of New York in mid-January. Kodak targets exiting bankruptcy in early 2013.

The company then hired Lazard as the financial adviser to explore strategic alternatives for its digital imaging patent portfolio.

Kodak sees patent sell-off as a way to rake in money, a supplement to its licensing strategy, which through 2008 to 2010, had brought in about $1.9 billion. Kodak's move couldn't have come at a better time as technology companies clamor to acquire key patents that could carve a niche for themselves.