"Sounds like they would be better off raising the dividend or paying out a big one-time sum."
Bargain Hunter, if Kodak had no interest in digital and was satisfied merely with its traditional film business, then their most appropriate strategy would be to buy their own stock, thereby raising earnings for the remaining outstanding shares. But Kodak does have an interest in digital, as expressed many times by management. Their best strategy is to develop technology internally, where they have the expertise, or to acquire technology externally where they lack expertise. Since the storing of images on flash memory is essential to digital, and since Kodak doesn't have this technology, acquiring stock in the leading company in this area does two things: It gives Kodak a claim on future profits from flash memory and, if Kodak buys enough shares, it gives Kodak a seat on the board of directors.
The display technology Kodak is developing as a replacement for liquid crystal displays involves depositing the display elements on a plastic base--which fits right in with Kodak's advanced coating technology. Image storage, however, is the missing element from Kodak's digital technology investment.
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