Whom Will TASER Buy?

Maybe I'm crazy, but as an investor, I simply can't help but notice the small stuff. That's why, when Reuters interviewed TASER International (Nasdaq: TASR  ) CEO Rick Smith about the retirement of his father, Phillips, from his role as chairman, I zeroed in on this statement:

"He also said the company may look to make some acquisitions with its roughly $50 million in cash."

To paraphrase my favorite TV character at the moment, Jeremy Piven's Ari Gold from Entourage: Really, Rick? Really?

Which competitor actually has something worth buying? BESTEX has a barely comprehensible website and an outdated library of schoolyard put-downs. Stinger Systems' stun guns apparently lack sting. And Law Enforcement Associates (NYSE: AID  ) has problems of its own.

Exactly none of these firms possess a technology that would dramatically improve TASER's stun guns. But one, Law Enforcement Associates, could open more doors at the U.S. military.

Unlike its long-hoped-for-but-never-delivered stun guns, LEA derives modest revenue from sales of surveillance and detection equipment to the military. Not that it's a great business, mind you. Restatements wouldn't be in order if it were. Nevertheless, someone at the Pentagon likes LEA enough to give its bread-and-butter technology a shot. Rick may want to buy his way through that door, TASER pistol in hand.

But is that contact worth at least $36.4 million, which equals the approximate enterprise value of LEA as I write? I can't see how. It hasn't been able to keep pace with last year's sales through the first six months of 2006. Shrinking revenue doesn't exactly bode well for future earnings growth.

TASER certainly has the cash to fund a buyout, even after subtracting the $15 million in cash it could pay to settle a class action suit with shareholders. But the mere existence of that moola doesn't make an acquisition a good strategy, especially if TASER's current competitors are among the prospective targets. Be careful, Rick.

A stunning array of related Foolishness is at your disposal:

TASER International is a Motley Fool Rule Breakers selection. Get more insight on the company with David Gardner's no-holds-barred interview with new company chairman Tom Smith. All that's required is a 30-day tryout of the Rule Breakers service. There's no obligation to buy and it's easy to get started. Justclick here now.

Fool contributor Tim Beyers isn't easily shocked, but he's pretty sure a TASER shot would do the trick. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on everything Tim is invested in by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.

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

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: 515741, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:08:02 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

Related Tickers

10/26/2016 4:00 PM
TASR $22.99 Down -0.20 -0.86%
Taser Internationa… CAPS Rating: ****