It's fun to watch everybody jump on the Palm (PALM) story. I just don't want to have anything to do with the stock. The numbers are just too scary.
Bloomberg has reported that the company has engaged bankers to sell the company. The shares were on the news that the company is now officially on the block, thinking it would result in some sort of quick, generous return. It was also disclosed this week that Harbinger Capital Partners had acquired a 9.5% stake. That concentrates 40% of the Palm's stock int the hands of two insiders: Harbinger and Elevation Partners. So I guess they will have motivation to move the deal.
I decided to look at the company as if I were considering the buying the stock on the raw numbers, without knowing anything about the "deals," or the potential acquisition (this is how I like to approach all stock buys). After all, it's the numbers that matter, right? If you are buying something you should be buying it because it has intrinsic value. Here's what I found:
- Palm lost $265 million in 2009.
- It logged an operating margin of -27% over the last four reported quarters.
- Return on assets: -21%
- Return on equity: N/A
- Revenue: $1 billion
- Revenue per share: $7
- Total cash: $591 million
- Total cash per share: $3.50
- Total debt: $391 million
- Palm's balance sheet as of Feb., 2010: Total liabilities: $1 billion. Total assets: $1 billion. Net tangible assets: ($505 million).
- Book value per share: -$1.76
This is not a pretty picture. The biggest item, of course, is that the company has a negative book value: That means it has more liabilities than assets. It has a sizable cash position ($591 million), but that number is reduced by $391 million in debt.
These are not the kind of numbers I look for in a company, this kind of investment is just not my style. I prefer to find companies that are growing, making money, and whose shares are selling at a discount to the growth metrics.
I will sit this one out, leaving the speculators to play to lottery wheel of the negotiation. I just have no idea what the right price for Palm is. A more detailed analysis of what I think of Palm can be found in my original post, which is here.
Disclosure: No positions