January 28, 2010 / 2:58 PM / in 8 years

UPDATE 3-Kodak results boosted by licensing, shares jump

* EPS $1.08 vs estimate of 18 cents

* Rev rose 6 pct to $2.58 bln vs estimates $2.38 bln

* Sales increase driven by patent licensing revs

* Shares rise 19 pct (adds results details, CEO comment, analyst comment)

By Franklin Paul

NEW YORK, Jan 28 (Reuters) - Eastman Kodak Co EK.N posted a much better-than-expected quarterly profit on Thursday, showing off the strength of its patent licensing and sales of consumer inkjet printers, and its shares rose more than 19 percent.

Kodak’s bottom line was propped up by deals licensing its patents to camera and phone makers. At the same time, its film, camera, and printer paper revenue suffered as the chancy economy causes consumers to eschew photo-taking vacations and businesses delay purchasing printing systems.

Analysts said that considering the concerns about the economy’s effect on demand for Kodak’s consumer products, the licensing deals may allay near-term concerns about Kodak’s financial health.

“We think these asset sales are a positive as they help to shore up Kodak’s balance sheet,” said Cross Research analyst Shannon Cross. “But the key to future results will be the rate of secular decline in entertainment film and required investments in consumer and commercial inkjet.”

Earlier this month, Kodak signed a pact with Samsung Electronics Co Ltd (005930.KS) that settled a patent dispute over digital camera technology. Then it sued Apple Inc (AAPL.O) and Research in Motion Ltd RIM.TO, claiming that Apple’s iPhone and Research in Motion’s BlackBerry infringe on its intellectual property.

It already has existing agreements with a technology companies including Nokia NOK1V.HE , Motorola Inc MOT.N, Sony Corp (6758.T) and Panasonic Corp (6752.T) .

For the fourth quarter, Kodak’s profit was $439 million, or $1.36 a share, compared with a year-earlier loss of $914 million, or $3.40 a share.

Excluding special items, the profit was $1.08, trouncing the average Wall Street estimate of 18 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 6 percent to $2.58 billion, beating analysts’ expectations of $2.38 billion.

Some $400 million in revenue was related to a licensing pact it signed with LG Electronics Inc (066570.KS) in November. In October, the company said it sees licensing revenue averaging at least $250 million to $350 million each year for the next several years.

Kodak will reap another $450 million this year from Samsung alone, under their licensing agreement.

On a conference call, the company tried to impress upon analysts that licensing was not entirely the fuel behind its strong results. Chief Executive Antonio Perez said that excluding the intellectual property licensing, Kodak’s gross margin improved by 6 percentage points or $100 million.

“We believe the elements of that improvement, they are sustainable,” he added.

As an example of the positive results beyond its patents, Kodak said it sold about 1.5 million units of its inkjet printers in 2009, and in the fourth quarter marked an 81 percent revenue increase in inkjet printer hardware and ink.

“Though we see further struggles, we are encouraged by Kodak’s positive digital sales momentum in inkjet, kiosk media and digital plates, as well as moderating declines at traditional film,” said Standard & Poor’s Equity analyst Erik Kolb, who upgraded Kodak to “strong buy” from “buy.”

Kodak, which makes cameras, electronic picture frames and consumer printers and offers professional printing services, completed in 2008 an expensive four-year restructuring that transformed it into a maker of digital photography products and printers. During that restructuring, Kodak halved its workforce.

Cost cuts have helped it boost earnings and profit margins at its corporate printing and film and entertainment units, despite declining sales at both segments in the fourth quarter.

In an effort to bolster its balance sheet and free up capital for investments, last September Kodak received a cash infusion from Kohlberg Kravis & Roberts [ID:nN16155121].

Kodak shares were up 92 cents or 19.4 percent at $5.67 in afternoon trading on the New York Stock Exchange. (Reporting by Franklin Paul; Editing by Gerald E. McCormick and Derek Caney)

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