To OTC Journal Members:
 

Can PhotoChannel (OTC BB: PNWIF) Save Kodak? They're Going To Try

Here's an excerpt from my 9/23 introductory edition on PhotoChannel. Based on today's news, you would have to admit this was a pretty good call:
 

Here's another potential catalyst for a skyrocketing stock price. Did you know that Kodak (NYSE: EK) is trading at a 15 year low? The stock was $90 in 1998, and today it is barely hanging on to $20. This former behemoth of the photo processing space has come under major criticism for its failure to participate in the digital photography revolution. Much like the US auto industry, who's complacency led to declining sales sales of gas guzzling SUVs while Toyota was eating their lunch with the hybrid Prius, Kodak was slow to recognize the consumer's willingness to adopt digital imaging. Kodak's management has a renewed mission to participate. Their bread and butter is chemicals, inks, and paper. OFoto- the Kodak online mail order service, is the largest photo processor in the B2C space. However, Kodak is looking at Online to Retail as a major new source of revenues, and they have the relationships with the big retail chains. What they don't have is the back end infrastructure. Some sort of arrangement with Kodak and/or Kodak customers is a distinct possibility. Why?- because two of the key board members are former Kodak executives. Keep one eye on the news for potential developments along those lines. An event of this nature would send shares of PHCHF to new multi year highs. OTC Journal: September 23, 2006 Edition

It's a tongue in cheek comment. Of course PhotoChannel is not going to "save" Kodak. Kodak has to get in step with the trends and save itself. However, based on today's post close news from PhotoChannel, it seems like they will have a hand in helping Kodak get a better foothold in the digital photography world.

Today, shortly after the market closed, PhotoChannel announced it has entered into a partnering arrangement with Qualex, Kodak's wholly owned subsidiary specializing in a digital output solutions for the digital printing and photo processing.

According to the press release, PhotoChannel and Qualex will team up to pursue new customers outside of the traditional photo finishing world.  I believe it is safe to assume teaming up with Kodak will open many doors to larger contracts much like the one PhotoChannel inked with the CVS pharmacy chain this past summer.

Kodak has a good presence in online photo finishing through its Ofoto Division. I believe they process the most online prints today. However, they do not have any real presence in the online to retail space. This arrangement with PhotoChannel, with their simple turn key back end technology, puts Kodak back in that end of the game, and gives PhotoChannel a huge name with major credibility.

Think of it this way- if tiny little PhotoChannel was able to land the CVS deal with its 5,000 outlets, what are they going to be able to do in a Kodak partnership?

In short, I believe a lot more new business will be in the offing for PNWIF. And, as they grow, margins will expand very dramatically. They have the infrastructure in place and adding more clients is simply a low overhead, no brainer.

As far as PNWIF goes, there is nothing but growth, growth, and growth ahead on the immediate horizon. 

Now, let's look at the chart:

For those who have been following the story, you know I first starting covering this reincarnated version of the company at the end of September. The stock was in the $.18 to $.19 range ($1.80 to $1.90 based on today's price). This is a look at the stock's performance throughout 2006.

Last week the company completed a 10 for 1 reverse split, and changed symbols from PHCHF to PNWIF on the US Bulletin Board, and from PNI to PN on the TSX exchange. Since that time, the company has disclosed it's revenues have tripled over the summer months as compared to last year, and with the $2 million cash they have on hand no further financings from the capital markets will be required (no dillution from greedy fund managers).

As I observed last week, this is one reverse split that should work beautifully. The company is done issuing shares to deal with its financial needs, and is also developing fast enough to deserve the attention of institutions that can't invest in $.25 stocks.

After this week nothing would surprise me. With 20 years of experience in these kinds of situations, nothing should surprise me. Tomorrow, I wouldn't be surprised to see PNWIF trade to a new all time high- perhaps $3, or the pre split equivalent of $.30 - it's in the cards for the short term.

I wouldn't buy into a big gap, but it would appear this company is certainly headed in the right direction, and for now the stock definitely wants to follow suit.

Here is the complete text of today's news for your review:
 

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