Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Xybernaut Strikes Out

Today, I want to recount an email exchange I recently had with a Fool reader named "Joe," regarding a Jan. 8 earnings release from wearable computing and communications systems firm Xybernaut (Nasdaq: XYBR  ) . Joe wrote me with feedback on an earlier Take that I wrote about this company.

The press release in question read: "Xybernaut expects record revenues for quarter and year." To which I responded, and I quote:

"Keep your eye off the ball, Joe. Remember, the company owns the ball. They show you the ball. Look for what they are not showing you. In other words, if the company says 'record revenues,' you ask 'and what about the earnings?' If they say 'record earnings,' you ask 'and did revenues grow too? And how about free cash flow? Got any of that?'"

On March 9, Xybernaut proved true to its word, issuing its 2003 earnings press release announcing "Record Revenues, Solid Financial Position and International Momentum."

Perfect. Xybernaut pitched three balls at us, so today, I want to play "Press Release Baseball" (a distant cousin of Tim Beyers' game Press Release Bingo). The cardinal rule of Press Release Baseball is, of course, to keep your eye off the ball. Let's begin:

Ball 1: Xybernaut reported record revenues in 2003. But those "record" revenues totaled just $11 million, up only 10% since 2002. In the same time period, the stock's price has increased 164%, and its share count is up a barn-burning 103%.

Ball 2: Xybernaut has a clean balance sheet with no long-term debt and $9.5 million in the bank. So its financial position certainly seems solid. However, in 2003, the company sold $26 million in newly-issued stock. Which means that it burned at least $16.5 million over the course of the year, and now has roughly six months' worth of cash remaining. It will certainly need to issue more stock in 2004 in order to remain solvent, and discloses as much in its 10-K (although, surprise! -- not in the press release.)

Ball 3: Xybernaut has issued 22 press releases in the last three months alone, describing its "international momentum." Yet, in 2003, the company made no profits (indeed, the company has not had a profitable year in its 14 years as a public company), and sold 2.5 times more worth of its common stock than of its goods and services.

Three pitches. Three swings. Three strikes. Time to send Xybernaut to the showers.

Want help finding companies that bat over .400? TryMotley Fool Hidden Gemsfree, for 30 days.

Motley Fool contributor Rich Smith owns no shares in Xybernaut.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 506413, ~/Articles/ArticleHandler.aspx, 10/26/2016 7:34:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes