Thu Jan 19, 2012 9:58pm EST (Reuters) - Eastman Kodak Co, the photography icon that invented the hand-held camera, has filed for bankruptcy protection and plans to shrink significantly, capping a prolonged plunge for one of America's best-known companies.

The Chapter 11 filing makes Kodak one of the biggest corporate casualties of the digital age, after it failed to quickly embrace more modern technologies such as the digital camera — ironically, a product it invented.

The bankruptcy may give Kodak, which traces its roots to 1880, the ability to find buyers for some of its 1,100 digital patents, a major portion of its value. Kodak now employs 17,000 people worldwide, down from 63,900 just nine years ago.

"It is a very sad day even though we had anticipated it," said Shannon Cross, an analyst at Cross Research who has had a "sell" rating on the company since 2001. "If it emerges, it will be a much smaller entity."

Kodak has struggled to meet its pension and other obligations to more than 65,000 workers, retirees and others who participate in its employee benefit programs.

The downfall has also hit Kodak's Rust Belt hometown of Rochester, N.Y., with its workforce there falling to about 7,000 from more than 60,000 in Kodak's heyday.

Andrew Cuomo, New York's governor, on Thursday called the bankruptcy "difficult and disappointing news" for the city, whose population was about 211,000 in the last census.

According to Kodak, George Eastman, a high-school dropout from upstate New York, founded the company in 1880 and began making photographic plates. To get his business going, he splurged on a second-hand engine to make the plates for $125.

Within eight years, the Kodak name had been trademarked, and the company had introduced the hand-held camera as well as roll-up film, for which it became the dominant producer.

Eastman also introduced the "Wage Dividend" in which the company would pay bonuses to employees based on results.

Kodak went on to create cameras such as the Brownie, launched in 1900 and sold for $1, and the Instamatic in 1963.

It is unclear how Kodak will handle its pension obligations, many of which it took on decades ago when U.S. manufacturers offered more generous retirement and medical benefits.

Many retirees hail from Britain, where the company has been manufacturing since 1891.

Kodak had promised to inject $800 million over the next decade into its British pension plan. It expects the trustee for the British plan to have a "significant" general unsecured claim against the company, court papers show.

(Reporting by Liana B. Baker, Caroline Humer and Jonathan Stempel in New York; Nick Brown in Las Vegas; Tom Hals in Wilmington, Delaware; and Sue Zeidler in Los Angeles; Editing by Mark Bendeich, Tim Dobbyn and Bernard Orr)

© 2010 Thomson Reuters. Click for Restrictions.

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