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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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.