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Stock Has Jumped Since $5.7 Billion Damage Request In Kodak Suit

March 14, 1988

BOSTON (AP) _ Polaroid Corp. has a stronger-than-expected case in its $5.7 billion damage lawsuit against Eastman Kodak Co., placing the instant photography pioneer in its best position in years, some analysts say.

The damage claim filed last month in federal court has sent Polaroid’s stock soaring on Wall Street, even though Kodak has dismissed Polaroid’s claim as ″ludicrous.″

The two companies are meeting in court this week to discuss a trial date in the damage portion of the case. In 1985, Kodak was found guilty of infringing on Polaroid patents when it entered the instant camera business in 1976.

The possibility of a large damage award has attracted investors and also invited speculation that a corporate raider might bid for the company in hopes of realizing a windfall on a big settlement.

″Polaroid has been viewed as attractive for some time by a large number of investors because of the potential it holds for a shareholder and even a raider,″ said Brian Fernandez, an analyst with Brean Murray, Foster Securities Inc.

Polaroid, based in Cambridge, was trading in the low $20s a share on the New York Stock Exchange until the damage request was made public Feb. 19. Since then it has climbed above $36 a share at one point. Polaroid’s stock rose 25 cents a share to $34 a share on Monday in consolidated New York Stock Exchange trading.

But purchasing patterns have been in small blocks, abnormal for a potential suitor, and no individual buyer has notified the Securities and Exchange Commission that it holds as much as 5 percent of the stock.

Polaroid won’t comment on stock activity, takeover rumors or a settlement.

″We have indicated from the very beginning 12 years ago that we were always open to an out-of-court settlement,″ spokesman Harry Johnson said. ″Talking about such matters in the media has a chilling effect on that possibility.″

U.S. District Judge Rya Zobel ruled in September 1985 that Kodak had infringed on seven of about 150 Polaroid patents on instant cameras and film. She barred the Rochester, N.Y.-based company from the business in January 1986.

Polaroid claims it is entitled to $3.2 billion in lost camera and film sales. The company is seeking $2.5 billion more for lost opportunities to develop and market new products.

But if Zobel finds Kodak guilty of willfully infringing on Polaroid’s patents, pretax damages can be tripled under federal law, raising the potential maximum award to $11 billion.

No one expects the settlement to be that large, but most predictions fall between $1 billion and $2 billion, well above initial $300 million to $500 million estimates.

″After reading the documents, a number of people said that Polaroid’s case is stronger than we had expected,″ said Eugene Glazer, an analyst with Dean Witter Reynolds Inc.

A $1 billion award, translating into about $10 a share, would allow Polaroid to diversify into fields such as information retrieval or conventional photography.

Along with the Polaroid brand name, the possibility that the company could run better under other management is keeping takeover interest high, analysts said.

″It has the characteristics of the type of company that could be run to generate greater cash flow,″ Glazer said.

Instant photography was invented by Polaroid founder Edwin H. Land in 1947 and first marketed in 1948. Polaroid held a monopoly for almost 30 years until Kodak entered the field.

Polaroid camera sales peaked at 7.5 million units in 1978 before sinking to 3.4 million in 1984. Sales jumped to 4.4 million in 1986 after the company introduced the Spectra camera, with quality closer to that of 35mm prints, but fell 16 percent last year.

Analysts said Polaroid could get a boost next month with the introduction of the Spectra 600, priced at $40 to $60, and the Image, which promises better quality for $60 to $80.

″It’ll help a bit,″ said Chuck Ryan, who follows Polaroid for Merrill Lynch Capital Markets. ″But I think (lower sales) reflects a declining trend in instant photography. Most people find $1 per copy expensive. In the meantime, autofocus cameras give more pleasing 35mm results.″

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