Palm Raises Its Defenses: Fool by Numbers
By Anders Bylund
December 19, 2007
On Dec. 18, smartphone designer Palm (Nasdaq: PALM) released second-quarter 2008 earnings for the period ended Nov. 30.
- Palm shipped 11% more phones than in the year-ago period, but lower selling prices meant lower dollar sales.
- A $325 million investment from private equity fund Elevation Partners enabled Palm to enter into a recapitalization program of $396 million in fresh debt. Most of that went straight into a one-time dividend payout of $9 per share -- a $949 million expense in October.
- That combination of increased liabilities and big dividends is often used as a takeover defense, but who would buy the troubled gadget guru?
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q2 2008
|
Q2 2007
|
Change
|
|
Sales
|
$350
|
$393
|
(11.0%)
|
|
Net Profit
|
($8.8)
|
$12.8
|
N/A
|
|
EPS
|
($0.09)
|
$0.12
|
N/A
|
|
Diluted Shares
|
105.3
|
104.1
|
1.2%
|
Get back to basics with the income statement.
Margin Checkup
|
Q2 2008
|
Q2 2007
|
Change*
|
|
Gross Margin
|
29.7%
|
35.4%
|
(5.7)
|
|
Operating Margin
|
(12.2%)
|
4.3%
|
(16.5)
|
|
Net Margin
|
(2.5%)
|
3.3%
|
(5.8)
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
Q2 2008
|
Q2 2007
|
Change
|
|
Cash + ST Invest.
|
$293
|
$518
|
(43.5%)
|
|
Accounts Rec.
|
$172
|
$247
|
(30.4%)
|
|
Inventory
|
$49.8
|
$38.9
|
28.1%
|
|
Liabilities
|
Q2 2008
|
Q2 2007
|
Change
|
|
Accounts Payable
|
$168
|
$192
|
(12.8%)
|
|
Long-Term Debt
|
$396
|
$0
|
N/A
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q2 2008
|
Q2 2007
|
Change
|
|
Cash From Ops.
|
($13.5)
|
$22.2
|
N/A
|
|
Capital Expenditures
|
$7.3
|
$8.3
|
(12.5%)
|
|
Free Cash Flow
|
($20.8)
|
$13.9
|
N/A
|
|
Owner Earnings
|
$3.8
|
$7.7
|
(51.2%)
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
|
CAPS Rating (out of 5)
|
|
Apple (Nasdaq: AAPL)
|
$160,610
|
46.9
|
****
|
|
Nokia (NYSE: NOK)
|
$140,840
|
15.2
|
*****
|
|
Research In Motion (Nasdaq: RIMM)
|
$56,700
|
66.7
|
**
|
|
Motorola (NYSE: MOT)
|
$36,690
|
84.0
|
**
|
|
Palm
|
$571
|
14.6
|
*
|
Source: Capital IQ.
Keep your partners close and the competition in your vest pocket.
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