What will a “Kodak moment” be without Kodak? In late August, Eastman Kodak Company announced that it plans to sell its flagship film business as part of a fundraising plan to emerge from Chapter 11 bankruptcy next year. The firm is looking to spin off its personal- and document-imaging businesses, which include film, photo developing kiosks, scanners and other divisions — a move that would render it a company focused mostly on inkjet printing and commercial services.

This “new” Kodak would be vastly different from the company that helped coin the phrase “Kodak moment” to indicate a one-of-a-kind opportunity that begs to be captured on film. “Whoever buys the film business from Kodak stands to gain access to a very valuable asset,” says Wharton management professor Emilie Feldman. “Much of Kodak’s value derives from its film business, so the future acquirer will need to manage that brand equity carefully.”

For Kodak, the key challenge will be that its name is so closely associated with film, not with any of its remaining businesses, according to Feldman. “Once Kodak exits film, the operations left behind will not have a concrete and well-established image on which the company can rely,” she says. “This will be problematic for Kodak vis-à-vis its external stakeholders — particularly investors and securities analysts, who will have to make sense of the new company.”

Until the mid-1970s, Kodak commanded 90% of the market for photographic film in the U.S. But it lost that dominance rapidly in the digital age. “Digital technology has all but done in the iconic filmmaker,” notes a Knowledge@Wharton article that traces Kodak’s slide over the years. Should the firm have chosen an earlier time to sell its consumer film business? “A company should divest its ‘legacy’ business when the value of its remaining businesses plus the value of the payment it receives for the legacy business exceed the value of continuing to run the legacy business within the existing company,” says Feldman. Kodak would have benefited more had it sold the film business when it was on top of the market, she points out. But now, given the company’s financial distress, the need to repay its creditors is dominating its strategy, she adds.

In the latest quarter ending in June, Kodak reported losses of $299 million on revenues of a little more than $1 billion. Since 2003, the company has closed 13 manufacturing plants and 130 processing labs, and reduced its workforce from 63,900 less than a decade ago to about 17,000 worldwide. After eliminating 2,700 jobs since the beginning of this year, the firm announced it would cut another 1,000 before 2013. Kodak also has seen some turnover at its top level: On Monday, the firm announced that its president and chief financial officer are stepping down.

Letting go of the consumer film business may not be painless for Kodak because of the branding halo it lends its other, lesser-known business operations. “Because legacy businesses constitute companies’ historical cores, the synergies between the legacy business and other parts of the company are likely to be particularly strong,” Feldman noted in another Knowledge@Wharton article, based on her research of legacy divestitures by diversified U.S. companies between 1980 and 2000.

In addition, companies are prone to miscalculating how their consumers will react to drastic changes in the way they do business. For example, Los Gatos, Calif.-based Netflix last September announced its intention to split its DVD rental and streaming media businesses, only to drop that plan a month later. Netflix’s consumers reacted badly to the idea of having to sign up for two different services. The plan to split the businesses “may be a harmful strategy,” Feldman had told Knowledge@Wharton Today at the time.

In a statement, Kodak acknowledged that consumer photography “has been the core of our business” for most of its history. “It is also important to note, however, that our brand is strong in commercial markets.” The company’s commercial services business now represents more than two-thirds of its sales, the firm added. Its reorganization plans include the sale of 105,000 retail kiosks and efforts to monetize its litigation-ridden portfolio of digital imaging patents. In early August, Kodak won a partial victory over Apple in a battle over digital imaging patents. It may either sell that portfolio or leave it as an alternative source of recovery for creditors, Kodak has said.

On Tuesday, Microsoft threw a lifeline to Barnes & Noble (B&N) by investing $300 million in the bookseller’s Nook e-reader and digital book subsidiary. Like other large retailers, particularly in the book industry, B&N has seen sales dropping in its brick-and-mortar stores, where analysts estimate that the company had an operating loss approaching $62 million in the year ending April 28. The investment will give Microsoft a 17.6% stake in the subsidiary, which also includes B&N’s college bookstore unit.

Microsoft’s cash infusion will help the bookseller’s digital business compete more aggressively with Amazon’s. According to The Wall Street Journal, B&N currently has a 27% share of e-book sales, whereas Amazon.com has 60%. Apple still leads in “media tablet” sales — 62% — compared with 6% for Amazon’s Kindle e-reader and 5% for B&N’s Nook device.

What does Microsoft stand to gain? “This is a platform play for Microsoft,” says Wharton management professor Daniel Raff. “If there is a niche for Windows 8-powered iPad-like devices, this might make them more attractive. The valuation suggests that [Microsoft sees] a lot of potential upside in this.” According to the Journal, Microsoft’s investment values the subsidiary at $1.7 billion. The change in B&N’s share price suggests that the market agrees, Raff notes: Following the announcement, the company’s shares were up 52% by the close of the day on Tuesday — the stock’s highest level in two years.

“The key actors here, in my opinion, aren’t centrally in books,” Raff adds. “They are Apple, Amazon and Microsoft.” According to Peter Hildick-Smith, president of Codex Group, which tracks trends in the digital book industry, these are among a handful of cash-rich companies that have “realized massive growth potential and are trying to grow share in the fast-emerging integrated device/media content/retail market.” (He notes that Google — with its Google Play online store and an anticipated device — is another significant player.) “This deal … gives Microsoft its first realistic stake in what we believe will be the dominant form of ‘retailing’ in this century, as Amazon is demonstrating with its 41% year-on-year growth rate. And starting with book consumers, who represent the top 20% of U.S. consumers, is a great place [to begin].”

Hildick-Smith, who notes that B&N is a Codex Group client, points out that entering this new form of retailing is particularly difficult for most companies to pull off and, according to his firm’s research, requires several elements in order to succeed, including: “a major, high equity brand in the content space,” “a best-in-class shopping platform with deep content available,” ” a deep reservoir of star ratings and thoughtful consumer reviews from its shoppers on every title it sells,” and a highly integrated store and device — or “e-tail solution.” And lastly? “Deep pockets.”

That last ingredient — as well as a long-term commitment — is precisely what Microsoft brings to the table for B&N, Hildick-Smith points out. “The integrated device/media content/retail business is phenomenally complex to build and deliver successfully,” requiring, among other things, significant funding to “grow it and spend on advertising,” he says. (The New York Times reported that Kindle ad spending was $150 million in 2010 alone, he notes.) “This is a land grab. The first to lock up a household with a branded, closed-platform device owns that household for the foreseeable future, meaning huge ROI. Kindle and Nook households are very loyal to their brands, and buy a lot more books within their brand family. Plus, the more additional types of content/products that are available to buy … the greater the [incremental] sales long-term.”

B&N has indicated that it will likely spin off the subsidiary into its own business. Wharton management professor Emilie Feldman, who studies divestitures, says this would be a wise future move. “I think the Microsoft investment was the right decision for the time being,” she says. “The investment gives B&N much-needed liquidity, allowing it to make strategic investments in both the Nook business and its ‘core’ brick-and-mortar operations.” Still, she adds, “B&N is a classic case of the whole being worth less than the sum of the parts, meaning that a spinoff of the Nook business in the future will unlock that value for shareholders. The Microsoft investment is useful because it gives investors preliminary information on the individual valuations of the two parts of B&N’s operations, paving the way for a complete separation.”