A Kodak Moment for OLED Displays

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Eastman Kodak (NYSE: EK  ) has been a major innovator in the field of organic LED displays for three decades. It wouldn't be unfair to call Kodak the father of OLED.

But the final chapter of Kodak's OLED history has been written. The company is selling its OLED technologies to Korean technology giant LG Group, which includes flat-panel display manufacturer LG Display (NYSE: LPL  ) .

The deal is expected to close this year, and comes alongside a cross-licensing agreement between LG and Kodak. The companies have dropped a host of patent infringement claims and lawsuits against one another, and LG ends up paying Kodak for the privilege. Other than that, we have no financial details on either the OLED sale or the cross-licensing agreement.

The technology, which in the long run promises to make digital displays brighter, cheaper to run, and easier to manufacture than today's plasma and LCD technologies, is set to become a billion-dollar industry next year. For true long-term investors, OLED is under development for uses like flexible displays and general lighting, and could one day replace the light bulbs and fluorescent tubes we use today.

Kodak spokeswoman Laura Quatela explained that the OLED technology is "fundamental" to Kodak's business, but "realizing the full value of this business would have required significant investment." That's a nice way of saying that it's expensive to build out manufacturing facilities for new technologies. Samsung is arguably the leader in making these displays using phosphorescent OLED tech from Rule Breaker Universal Display (Nasdaq: PANL  ) . Samsung only makes small OLED screens suitable for cell phones and such, and uses them in a low percentage of its mobile phones.

This is just another in a long line of acquisitions in the OLED space, which is starting to crystallize into a small band of companies ready to do the capital-intensive heavy lifting it takes to get OLED technology into the mainstream, and then into larger formats like television screens. Sumitomo, which is sort of like the General Electric of Japan, bought OLED research outfit Cambridge Display in 2007, and LG Display sucked in the OLED expertise from former parent company Philips (NYSE: PHG  ) and LG.

Electronics giants like Samsung, Sony (NYSE: SNE  ) , and Panasonic (NYSE: PC  ) all have OLED ambitions and could benefit from having a veteran research team with a solid patent portfolio in-house. Economies of scale matter in expensive revolutions. Could Universal Display be next in the buyout line? Discuss the possibilities below -- and don't be shy! Each comment sends a $0.10 donation to a deserving cause.

Fool contributor Anders Bylund is a longtime shareholder in Universal Display, but he holds no other position in any of the companies discussed here. Universal Display is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (7) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 08, 2009, at 3:01 PM, lemoneater wrote:

    as a PANL shareholder, I will be eagerly watching developments. Thanks for the heads up.

  • Report this Comment On December 08, 2009, at 3:49 PM, Eohippus617 wrote:

    Hopefull Universal will be in a biiding war to be bought out and they will resist until the price is right. In about 18 months after the stock has tripled then an 80% premium to be bought.

    Yes I am long PANL

  • Report this Comment On December 08, 2009, at 5:37 PM, Cdrreeves wrote:

    The impact of the move on PANL depends on the terms of the deal. If it places a high valuation on the assets, it will ease the way for PANL to explore a capital raise in the next couple of years. If the deal is more a case of Kodak exiting the business under poor terms, it will have a (broadly) negative impact.

    Of course, PANL may itself be positioning for an exit through acquisition and (therefore) the deal may have a positive/ negative impact on the valuation (and terms) ascribed to PANL.

    The longer the company stays in the business, and the longer its technology stays relevant, the better the odds of the company gaining traction and starting to generate real revenues.

    The only way to look at the stock is as a long term investment in the sector.

    Long PANL

  • Report this Comment On December 09, 2009, at 3:47 AM, Clint35 wrote:

    I love PANL. They rule!

  • Report this Comment On December 16, 2009, at 2:19 PM, BgDav298 wrote:

    PANL now has to worry about competition from a company with deep pockets, this looks bad to me they are very small compared to LG.

    Long PANL

  • Report this Comment On December 23, 2009, at 8:58 PM, Aug93 wrote:

    PANL patents alone may be worth a ton to Applied Materials or AU Optronics or the like. Doubt PANL management would be interested at less than $50/share. At least there's plenty of staying power w/ >$70 million in cash and no debt.

  • Report this Comment On December 06, 2010, at 4:04 PM, gedda wrote:

    I believe OLED is the lighting of the future - it may be time to seek out who will be the major players; no doubt the usual suspects. I think Philips were heading in this direction so presumably LG has the right stuff now. I'm in for the long haul. I'm long on PANL too - love 'em!

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