High-end audio equipment can make for sweet, sweet financial music as well. That's why we're checking up on audiophile favorite Harman International (NYSE:HAR), the business behind Harman Kardon consumer electronics, ahead of its Wednesday night earnings call. Is this symphony nearly played out, or hitting a fresh start after the intermission? Let's find out.

What analysts say:

  • Buy, sell, or waffle? Seven Wall Street firms cover Harman, with two buy ratings and five holds between them. In our Motley Fool CAPS community, it's a three-star stock, based on input from 58 investors like you and me.
  • Revenue. A $946 million performance would soothe the jangly nerves of your average analyst. That would represent 10% annual sales growth.
  • Earnings. The Street is looking for $1.22 per share, up from $1.09 a year ago.

What management says:
Harman installed a new CEO, president, and vice chairman two days before filing its latest quarterly report. Dinesh Paliwal comes with a fine Swiss-Swedish-Indian pedigree, having served as president, chairman, and CEO of various units in multinational industrial concern ABB (NYSE:ABB) over the last couple of decades.

What management does:
The slight decline in most of the margins looks acceptable, considering the fiercely competitive home-theater market in which Harman plies most of its trade. But the cash flow crash has me concerned, and I fear that the trend may continue. Investors will have to watch for a substantial drop from last year's tidy second-quarter free cash flow of $103 million, and its $158.6 million in operating cash flow.

In addition, the growth engine seems to have stalled entirely. It's not a crash (yet!) but this system could use some more power to its woofers and tweeters.

Margins

12/2005

3/2006

6/2006

9/2006

12/2006

3/2007

Gross

35.2%

35.5%

35.5%

35.4%

34.7%

34.6%

Operating

13.1%

13.3%

13%

13%

12.7%

12.5%

Net

8.3%

8.2%

7.9%

7.8%

7.8%

7.8%

FCF/Revenue

10.4%

9%

8.3%

6.1%

3.5%

1.7%

Y-O-Y Growth

12/2005

3/2006

6/2006

9/2006

12/2006

3/2007

Revenue

8.1%

8.2%

7.2%

7.3%

8.9%

9.5%

Earnings

33%

21%

9.6%

1.9%

2.5%

5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
All of the above information is about to become moot, though. Harman agreed to be acquired by Kohlberg Kravis Roberts and Goldman Sachs (NYSE:GS) subsidiary GS Capital Partners for $8 billion, or $120 per share. That's a 17% premium to the stock price just before the bid.

So there's a new boss holding the volume controls, and Harman will soon have an entirely different operating structure -- out of the public eye. The slow decay of the post-buyout-announcement share price might signal that investors don't think the deal will get shareholder approval, and I can see why.

Harman owners have seen five-year returns in four-bagger territory, despite a couple of rough years at the tail end. I can't blame them for wanting to give Mr. Paliwal a shot at righting the ship and getting back to the stellar performance of yesteryear. There's also the matter of regulatory approval, with a Sept. 18 deadline for the European Commission's evaluation.

We'll see what happens soon enough. If the deal falls through, we'll get another shot at joining this high-fidelity roller coaster. If not, well, there's always Sony (NYSE:SNE) or Apple (NASDAQ:AAPL), right?

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the prognosticator of prognosticators.