Kodak sells online business to Shutterfly, patent sale pending

ROCHESTER, N.Y. –Fri Mar 2, 2012: Eastman Kodak Co. has agreed to sell its online photo services business to Shutterfly Inc. for $23.8 million, kicking off the bankrupt photography pioneer’s relaunch as a much slimmer company although a patent sale seen crucial to its turnaround may still be months away.

The once-iconic company that invented the hand-held camera has said it will quit the camera business and is expected to fetch $1 billion to $2 billion from the sale of about 1,100 digital patents, which is due to get under way by June 30.

A source familiar with the patent sale said the process was moving forward, but added that the completion was not expected anytime soon.

Complicating the prospects is a dispute with computer giant Apple Inc. over one of the patents.

At a hearing next week on March 8, a bankruptcy judge will hear Apple’s motion to move forward with its patent-infringement suit. Apple has asked the bankruptcy court to lift the automatic stay applied to pending litigation against Kodak when the company filed for Chapter 11 on Jan. 19.

Kodak said the deal with Shutterfly followed a “stalking horse” bid – a starting bid or minimally accepted offer that other bidders must surpass in a court-supervised auction – from the web-based personal publishing service.

Shutterfly shares rose 18 percent to $31.70 in extended trade, following the news. The stock had closed at $26.91 on Thursday on the Nasdaq.

Shutterfly said it will transfer Kodak Gallery customer accounts and images in the United States and Canada to Shutterfly, and will allow customers to opt out of the transition if they do not want their photos to be transferred.

Kodak Gallery – which enables users to store and share their own images and create custom printed photobooks, cards and albums – has more than 75 million users.