Concord Camera Corp. (NDAQ: LENS) has more to worry about than a cold market as activist shareholders are now (in so many words) calling for an outright sale. The camera-maker has experienced steep declines in sales and margins that have resulted in over fifteen consecutive quarters of losses. This prompted the company to pursue its own evaluation of strategic alternatives as many are speculating that a financial buyer may be willing to step in and acquire the company at a premium. So, does this make LENS a buying opportunity before such an announcement?

Concord is engaged in designing, developing, manufacturing and selling single-use and 35-millimeter traditional film cameras. The firm manufactures the cameras in China and hands them over to retail distribution partners who put them on store shelves around the world. This is a market that still exists thanks to tourism, but faces steep declines in sales as digital cameras continue to replace traditional film cameras. Worse, the company is operating on razor thin margins due to its middle-man nature that makes it hard to compete effectively on price with a growing number of manufacturers that are doubling as distributors.

Everest Special Situation Fund recently purchased a five percent stake in the company and communicated their belief that Concord shares are extremely undervalued despite poor operating performance. The activist fund believes that the company is in an excellent position to initiate “substantial changes” to its business. To this end, the board of directors announced that their special committee established to explore strategic alternatives was close to making a decision. However many investors, including Everest, are worried that the result may be that the company is best off taking the lonely road rather than pushing for a sale.

Everest demanded (in so many words) a sale in its February 20th letter to the board. The fund noted that it has collaborated with a number of companies in situations similar to Concord’s in the past, acting as a liaison between investors and acquiring companies. Everest urged the board to utilize their expertise and pursue strategic alternatives or else they would seek representation on the board to protect their rights as stockholders and unlock value. Clearly, many people are looking for Concord to put itself up for sale at this point in order to reverse its sixteen straight quarters of losses and maximize value for stockholders. Indeed, privatizing the company alone would substantially reduce expenses for a company with a market cap of just $25 million!

In the end, Concord is a company that may be of interest to a financial buyer as its shares are extremely undervalued. In fact, privatization alone would likely save the company enough money in public company costs to justify a takeover. Many shareholders are in support of such a decision, but fear that the company may put up a fight before pursuing alternatives. Combined, these factors make LENS a stock worth watching closely over the next few months!

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