Kodak Shares Getting Jiggy

Whassup with Kodak?

Last week the chart was starting to look like a coiled spring. But even if charts are not your thing, takeover chatter might have piqued someone’s interest.

Hewlett-Packard (HP), the listed California-based company, may take a look again at Eastman Kodak in the new LBO environment, industry sources said.

The rationale is that listed HP, now the world’s biggest computer and printer maker, and listed Kodak, the No. 1 maker of cameras and photo equipment, would create a global imaging powerhouse. The move also could strengthen HP in the imaging market, where listed Apple is benefiting from its iPhone for consumers. Kodak already has a 10-year deal to develop camera sensors for mobile phones from listed Motorola. Financial Times

Are the shorts sweating bullets yet? Several of them have recently offered up a theory that we have considered, but seems to be a bit of a stretch. Legg Mason’s Bill Miller is struggling mightily again this year. And Legg Mason is chock full of Kodak’s stock. The bears were looking for him to start selling the position if redemptions continue to chip away at assets under management. It might not be inconceivable, but Miller is not quite at the puke stage yet. But the gunslingers in black hats make no apologies, and might be gunning for Miller and his outsized position.

Of course, the connections between the two companies might fuel continued speculation.

The rationale behind the deal is that HP, currently the world’s largest computer and printer maker, and Kodak, the largest maker of cameras and photo equipment, would create a global imaging powerhouse if they were to merge (see article from the Financial Times). We created an IntellectSpace Knowledge Map to determine if any corporate ties could play a role should merger talks commence. We were surprised to find very strong ties through Kodak CEO Antonio Perez, Spansion Inc, and Performance Technologies Inc.

Another notable tie is through Spansion, where HP SVP Dave Roberson and Kodak Director Hector Ruiz share a directorship. Both have served as Directors since 2005 and are most likely quite familiar with each other. News Visual

Strategic buyers are the only game in town, and perhaps would finally be willing to take advantage of the languishing valuation in Kodak’s shares, particularly if the fundamentals are beginning to stabilize, or even turn.

Short sellers might not be the only investors keeping a lid on the stock. Vanilla accounts and hedgies looking at the stock long here might have been, at the margin, dissuaded from getting involved given Legg Mason’s giant position, which was nearly 20% of the company at the end of June.

This story has been forever boring, but with the shorts pressing their bet, perhaps fireworks will finally light up Rochester.

This stock has indeed been left for dead. But color us skeptical.

Hewlett-Packard perennial bid speculation for Kodak resurfacing, industry sources say
Financial Times

HP – Eastman Kodak Deal Could Create Global Imaging Powerhouse
News Visual
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position EK.

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