Shutterfly bids $23.8 million for Kodak Gallery customers

The bid, part of a bankruptcy auction process, would shift all of the online photo business' customers but none of its employees or intellectual property to Shutterfly.

Eastman Kodak, operating under bankruptcy protection, agreed to sell the customer accounts of Kodak Gallery to Shutterfly for $23.8 million.

Shutterfly's offer is the first step of a competitive bidding process designed to maximize the value of Kodak's assets. The so-called stalking-horse bid could lead to another buyer picking up the business. In a statement, Kodak said it hopes to complete the sale process this spring.

"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," said Pradeep Jotwani, Kodak's president of consumer businesses and chief marketing officer.

As part of the bankruptcy proceeding, Kodak is narrowing its consumer business to retail photo kiosks as well as home printing products.

If Shutterfly prevails, it has agreed to only buy the customer accounts, which total more than 75 million users. Those customers who don't want their photos transferred to Shutterfly can retrieve images through free downloads or purchase DVDs from Kodak Gallery.

Shutterfly has told Kodak that it won't need most of Emeryville, Calif.,-based Kodak Gallery's 150 employees.

"If they are successful, and none of our employees receives an offer, we would be looking at a situation (where) there would no longer be positions for them at Kodak," Kodak spokesman Chris Veronda said.

Workers without jobs would receive severance packages.

Shutterfly also doesn't plan to acquire any intellectual property, including recently launched apps for the iPhone and Android devices that let users create ad hoc social networks to share their photos. Without those customer accounts, the apps have no value. So it's likely they'd be pulled.

A spokeswoman for Shutterfly declined to comment on the bid.

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