Eastman Kodak Co. (NYSE: EK) did not have much going for it before today, but a mixed ruling from the International Trade Commission has shares reeling this morning.  The case, filed against Apple Inc. (NASDAQ: AAPL) and Research in Motion Ltd. (NASDAQ: RIMM), involved the patent for previewing images with digital cameras.

This patent instance is meant to pertain to cameras embedded into smart phones like iPhone and Blackberry.  Effectively the ITC has now sent the matter back to the administrative law judge.

Our take on the matter is that Eastman Kodak has been trying to use patent revenues to assist in funding new consumer and commercial printing operations.  Eastman Kodak CEO Antonio Perez has previously indicated that those businesses will not be profitable until 2012.  Whether this mixed ruling changes that or not is still up in the air.  The full ruling may not come before the end of August.

Samsung and LG have settled with Kodak and the company has other settlements from approximately 30 other companies, but this revenue stream appears to be on the decline or at least at-risk in the years ahead.  Eastman Kodak is still in the red here and there has been very limited profitability in recent times.  The company’s cash on hand has also been contracting in at least each of the last two years and then again so far this year as of March 31.  That cash balance of $1.3 billion is also a near-term low, and its cash balance is now less than its long-term debt as of March 31.

Kodak is one of those brands which is very much at-risk for the future.  If you have an iPhone or another smart phone, there is actually very little incentive to go out and buy a digital camera or an old-school film camera these days.

We have yet to see any analyst rating changes or estimate changes against earnings ahead.  As of now, the Thomson Reuters estimates are -$2.19 EPS for 2011 and -$0.58 EPS for 2012.  If we just straight-line those figures with roughly 269 million shares, then the raw figures alone would come up with another cash-burn rate of more than $700 million by the end of 2012.  Admittedly, that figure is very rough and we are only using raw estimates rather than formal GAAP earnings.

It does not appear that Kodak is close to imploding in 2011 and it looks like it can still survive into and even through 2012.  Beyond that, however, that depends upon whether or not Antonio Perez’s turnaround plan can come to fruition.  We have argued that it was time for him to go for quite some time, and this latest mixed ruling does nothing to help out Mr. Perez in defending his tenure at Eastman Kodak.

Thomson Reuters shows that revenue projections this year are $6.39 billion, a low, and that revenues are expected to grow to $6.46 billion in 2012.  Revenues were $8.09 billion last year, $8.10 billion in 2009, and $9.41 billion back in 2008.

Shares are down 14.25% at $3.06 today and the 52-week trading range is $2.75 to $5.95.  Sadly enough, the company’s market cap is now only about $823 million.

Antonio Perez is running out of time.

JON C. OGG

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