Shutterfly (NASDAQ:SFLY) had announced its bid for Kodak Gallery, Kodak’s online photo sharing business back in March. It was trying to acquire Kodak Gallery for $23.8 million, as Kodak filed for bankruptcy and was desperately trying to liquidate its assets. The deal is now almost done, as no other bidders came forward with a higher bid than Shutterfly. 
Shutterfly is primarily an online photo sharing, storage and printing service which enables users to create customized products like photobooks, cards and prints using their images. It competes primarily with services like HP’s (NYSE:HPQ) Snapfish, American Greetings’ Photoworks and Webshots brands, and even Apple (NASDAQ:AAPL) that ventured into this business lately, with its new Cards app on iOS.
Kodak Gallery acquisition to Boost Shutterfly’s User Numbers
Kodak was one of the largest players in the online photo sharing business. It had more than 75 million registered users worldwide. Following the acquisition, all the Kodak Gallery customer accounts and images will be transferred to Shutterfly. Though traffic to Kodak’s website had declined in recent years, its large user base will be a great addition to Shutterfly.
Shutterfly’s total number of customers increased was around 5.9 million in 2011, and we expected it to grow to more than 6.8 million organically by 2012. However, this new Kodak Gallery acquisition will significantly boost its user base, and accelerate its international expansion plans. We will update the Shutterfly model estimates and forecasts to account for the acquisition once it’s complete. For now, you can check out the impact of any increase in Shutterfly’s customer base on its price estimate using this chart:
We have a $30 Trefis price estimate for Shutterfly, which is in line with its market price.Notes: