Research in Motion (Blackberry) Should Buy Eastman Kodak

File this under whimsical thoughts.

I used to live near Rochester, NY and I interned at Eastman Kodak for two summers in college. It was a great experience. I learned so much about manufacturing one year and the next it was corporate life. Manufacturing film is remarkable because it is all done in the dark (you can’t expose film to light). There are many different OSHA standards to follow and truly hazards all around. When I was in the corporate offices I observed a different mentality. It was much more reverential and I mean that in both a positive and a negative. What was important to understand is the personalities and how to navigate their priorities. That was a couple of enlightening summers.

Since that time I’ve noticed Eastman Kodak continually laying off employees as it tries to adjust to a digital age of photography. Their strategy for digital expansion has had several stumbles. I attribute this mainly to Kodak being unable to change it’s identity. It is a chemical manufacturing company – digital services is somebody else.

Research in Motion or RIMM is the company that make the Blackberry. Since 2001 the Blackberry has been the phone of choice for business personnel. Their killer app is the integration of company email into the handset. Since that time RIMM has grown and expanded their product line to consumer oriented devices that do pictures and music in addition to email and talking. Their Operating System is very user friendly as well. RIMM does digital services.

Research in Motion should buy Eastman Kodak! Why? EK is cheap. Their market capitalization is $1.25 Billion. That means RIMM, who has a market capitalization of $33.39 Billion, can be bought for somewhere around $2 Billion, which gives the shareholders a reason to deal. So what does RIMM get for $2 Billion? An operating entity in the photography world, a patent portfolio that can be mined, and most importantly, an expertise in digital recognition. This last part is a little vague so I will explain.

Google leads by a large margin in internet search. It uses this leverage to gain advertising dollars. Over the last two years Google has launched an open source platform for cell phones, so they now directly compete with RIMM. Cell phone devices are morphing into multichannel communication machines – understanding information is key. Google does a good job of this, but one area of weakness is in pictures. Computers don’t read pictures for relevance very well. This is an area that Kodak can help RIMM. Now, I’m not presupposing that EK has this down pat, but it does have many sharp minds and patents that can add to something.

There are downsides to a RIMM/EK deal but the gains for each company outweigh them. Kodak simply can’t survive as is and Research in Motion must continue to grow their data and information competencies.


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