Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Sometimes, It's a Numbers Game by Bill Alpert
Summary: On Wednesday, Syntax-Brillian Corp. (BRLC) struggled to raise $125 million in a follow-on stock offering. In its prospectus, the low-price TV maker (Olevia) declared a large profit over the last nine months. But a more careful examination reveals that bottom-line profits have been fed by massive rebates from Taiwan Kolin, who contract manufactures most of its TVs. Without Taiwan Kolin's $165 million in rebates since late 2005, Syntax's sterling profits would have amounted to a $64 million loss, before operating expenses. CEO Vincent F. Sollitto Jr. says all TV makers "true up" quarterly margins; the only difference is that his company discloses them. But Kolin happens to also be Syntax's #1 shareholder -- it owned 11% before last week's offering, in which it dumped $5 million in stock, and it's registered to sell half of its remaining stake after a 90-day lockup. Barron's Tech Trader Bill Alpert says Kolin may make more money on its stock sales than it does selling TVs.