EK is trying to sell off one of its few modern businesses

Eastman Kodak (NYSE:EK) is trying to sell its online photo-sharing business, Kodak Gallery. Why would Kodak cannibalize one of the few 21st century businesses it has when legacy film sales continue to disappear in a digital age?

Simply put: Kodak has no choice. Either it dies a slow death, mortgaging its future to keep EK stock afloat, or it declares bankruptcy within the year.

It�s a sad state of affairs for what was once a name synonymous with photography in America.

At the end of September, Eastman Kodak stock sold off more than 20% in a single day of trading after the company announced it had tapped into $160 million from its credit line for �general business purposes,� prompting fears the company didn�t have enough cash to keep the lights on. EK stock has been brutalized ever since, down more than 50% in just 60 days and more than 80% year-to-date.

Kodak warned investors it will run out of cash within 12 months if it can’t raise new funds from lenders or asset sales. But in this already difficult credit market, one has to wonder who would offer up such a loan — and even if asset sales materialize for Kodak Gallery or the company�s digital imaging patent portfolio, you have to wonder what would be left of Eastman Kodak after the fact.

There are many ugly and embarrassing realities about the Kodak situation. Perhaps the most glaring amid the political gridlock in Washington these days is the fact that Kodak�s CEO, Antonio Perez, is a member of the President’s Council on Jobs and Competitiveness. Seeing as the unemployment rate in general is stuck at 9% and the specific future of EK is grim, that�s a rather absurd state of affairs.

Then there’s also the fact that Kodak engineers developed the first digital photography technologies in the mid-1970s. The company either didn�t understand the potential or didn�t want to think beyond its legacy film business — now Kodak is paying the price.

Another telling sign is that many brand studies show consumers think Kodak is a stodgy film-and-negatives company — and that ultimately dooms EK to failure even if it manages to establish itself selling digital cameras and photo printers. Consider that a decade ago, Interbrand�ranked Kodak as the 16th most valuable brand in the world, worth $14.8 billion. Every year since, the Kodak brand has fallen in both rank and value. And now, in a world of Shutterfly (NASDAQ:SFLY) and Yahoo (NASDAQ:YHOO) property Flickr, Kodak just doesn�t have the currency it used to.

And let’s not forget Kodak was a proud member of the Dow Jones Industrial Average for 74 years before its removal in 2004.

The once-iconic Kodak might be able to stay afloat for another two or three years as it sells itself for parts. Optimists insist the cash burn is overblown — even though filings show $862 million on hand in the quarter ended Sept. 30, down a stunning 38% from $1.4 billion during the same period of 2010. And corporate executives insist that Jones Day — the massive law firm known for working on big-time restructuring cases that include defunct bank Lehman Brothers — is simply an adviser helping Eastman Kodak in a troubled time, and nothing more.

Only time will tell what the real story is with Kodak. But shareholders and photo lovers should be realistic about the challenges the company faces in the next year. There is a very good chance America�s �Kodak Moment� won�t last for much longer.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.