Shutterfly agreed to buy the bankrupt online photo service Kodak. A $23.8 million deal for Kodak’s Gallery was announced after the markets closed on Thursday, March 1. Shares of Shutterfly (NASDAQ:SFLY) went up 20% higher in early trading on Friday.
Youssef Squali, an analyst at Jefferies & Co. wrote, “With this deal, Shutterfly would eliminate a sizable competitor and solidify its position as the largest player in online consumer print.”
Kodak (PINK:EKDKQ) filed Chapter 11 bankruptcy protection on January 19, 2012. They were once the dominant company in film and photograph business, but couldn’t prepare for the shift from film to digital photography. Kodak Gallery enables users to store and share their images online and also lets them create custom printed photobooks, cards and albums. Kodak Gallery has more than 75 million U.S. and Canadian users.
Shutterfly is a small successful online photo service with revenue in 2011 at $473.3 million and income of $35.4 million. Shutterfly was founded in 1999 by Jim Clark who was also the founder of Silicon Graphics and Netscape Communications.
Baird Equity said about Shutterfly acquiring Kodak, “The deal not only offers Shutterfly a healthy base of new customers at an attractive acquisition price, but also a group of photo enthusiasts that should adapt well to Shutterfly’s platform and product offering, and present new cross-selling opportunities.”
Pradeep Jotwani, president, consumer businesses and chief marketing officer in a prepared statement that stated, “This sale is consistent with our objective of focusing Kodak on a core set of businesses in which we can most profitably leverage our technology and brand strengths, and provides a well-proven mechanism for ensuring that Kodak receives maximum value from these assets.”
Shutterfly continues to compete with Hewlett-Packard (NYSE:HPQ), but this acquisition will provide them with more customers and users.