Click to enlargeInfoSonics (NASDAQ:IFON) distributes wireless handsets in South America and Asia. The company trades for $9 million, despite cash of $17 million against total liabilities of $5 million. In addition, the company has receivables and inventory on hand of over $8 million.
This is a company in transition. The country in which it sells most of its phones, Argentina, slapped a 30% tariff on phone imports, which reduced demand for the company's products. Furthermore, the company has shut down its US and Mexican operations and its use of outsourcing in the design of its private label phone products. These and other issues have contributed to a massive drop in the company's revenue.
Instead, the company has decided to focus on developing a strong portfolio of private label phones. To that end, it just opened a design centre in Asia, and expects to concentrate its sales in Asia and South America. InfoSonics completed its first handset sale in Asia subsequent to the end of the last quarter.
The good news for shareholders is that management is along for the ride: the company's CEO owns about $3 million worth of this company. As such, he is likely to invest company money only for the purpose of generating returns, rather than for empire-building. The company's recent exit from unprofitable segments (generating cash from receivables and inventory in the process) are a testament to this.
This investment has some similarities to a that of a venture capital endeavor, in that management has a strong stake and the company faces a lot of uncertainty as it tools itself up to develop new products for new markets. But there is one major difference between this investment and a venture capital investment: this company has more equity in the form of cash alone than the investment's asking price.
Disclosure: No position