Archive for the ‘Uncategorized’ Category

AT&T buys T-Mobile. What’s Sprint worth?

Sunday, March 20th, 2011

AT&T seems to be buying the operations of T-Mobile from Deutsch Telecom. In other words, it’s not assuming debt or cash. More details will be needed to be certain, but if this is correct, then the purchase price is reflective of the enterprise value (EV) of the company. At $39 billion for roughly 35 million customers, let’s say the operations of T-Mobile are worth roughly $1,000 per customer. Sprint, a comparable operation to T-Mobile, has roughly 50 million customers, meaning it would be fairly valued with an EV of $50 billion. It’s current EV is $30 billion, so it looks significantly undervalued. Sprint also has rights to more spectrum than T-Mobile, although it is also incurring more expenses building out its network.

Oil v. alternative energy

Wednesday, December 22nd, 2010

Alternative energy is getting none of the boost that it has previously gotten from high oil prices. The reasoning has always been that high oil prices incentivizes investment in alternatives. It makes them cost competetive, and it makes the public conscious of the need to develop a diversity of sources. Yet, this graph suggests the reasoning is not present in the markets at the moment. The red and blue lines represent the price of oil (USL) and the iShares energy ETF; the green and pink lines are solar (TAN) and wind (FAN) ETFs, respectively:


One likely expalanation is that wind and solar are primarily candidates for power generation, and as such compete with coal, natural gas, and nuclear. Oil, since it’s portable, is a transportation fuel.

Infosonics (IFON)

Wednesday, December 15th, 2010

From recent quarterly report:

We are a provider of wireless handsets and accessories to carriers, distributors and OEMs in Latin America and Asia Pacific. We distribute products of original equipment manufacturers (OEMs), such as Samsung, and we also design, develop, source and sell a proprietary line of products under our own verykool ® brand, which includes entry-level, mid-tier and high-end products.

The wireless business is extremely competitive. We must develop and deliver a constant flow of new and innovative products and foster close relationships with carriers and other customers. We also focus on cost and operational efficiencies so that our products can be price-competitive in the marketplace. It is important for us to manage our supply chain closely to provide timely delivery of product to our customers and to minimize exposure to inventory levels. We provide distribution and solution services, including integration and product testing, approval and certification, warehousing, logistics services (packing, shipping and delivery), marketing campaigns, warranty services and end-user support.

In 2010 we took a significant strategic step in our business as we launched our own development team in China. Previous to this, the design and development of our verykool ® phones were contracted out to third parties. Bringing design and engineering resources in-house will provide us the opportunity to focus entirely on our own branded products, accelerate time-to-market, be more responsive to our customer base and reduce our costs and expenses to improve our gross margins and profitability. The production of our verykool ® phones continues to be outsourced to EMS contract manufacturers in Asia, to which our development team is in close proximity. We recruited a team of very experienced management and technical personnel who will serve as both our design house for all markets and as the base for marketing and selling our products in Asia-Pacific. The team currently consists of approximately 40 employees, primarily engineers, located in Beijing. The quarter ended June 30, 2010 was the first full quarter of operation of our China subsidiary. Its expenses are classified as R&D expenses on our statement of operations, together with any NRE (non-recurring engineering) expenses paid to other design houses. We shipped our first product designed by our China team to a customer in China in October 2010. We expect to continue to use outside design houses to augment the efforts of our China development team. All of our manufacturing is done by contract manufacturers in China.

We decided during the second quarter of 2008 to discontinue our operations in Mexico and the U.S. Although we have essentially completed this process, we are currently working to obtain a refund of the $790,000 of VAT tax prepaid in Mexico

Historically, our primary sources of liquidity have been cash generated from operations, lines of credit (bank and vendor) and, from time to time, sale and exercise of securities to provide capital needed to support our business. However, we have incurred losses for the last three fiscal years and negative cash flow from operations for two of those years. In the nine months ended September 30, 2010, the contraction in our business has allowed us to reduce our working capital needs, decrease balances in accounts receivable by $37.4 million and inventories by $622,000, reduce accounts payable and accrued expenses by $10.0 million and generate $24.5 million in cash flow from operations during the period. This cash flow, together with our existing cash balances, enabled us to retire all $25.5 million outstanding under our bank line of credit, and at September 30, 2010 we had $17.2 million in cash and cash equivalents and no outstanding debt.

Because we outsource all the manufacturing of our proprietary verykool ® products, our business is not capital intensive. We expect that continued minor investments will be made in the form of tooling and molds for new products.

The Company believes that its current cash resources and working capital are sufficient to fund its operations for the foreseeable future.

No insider buying. Perhaps because Yahoo (not perfectly reliable) reports: “Held by Insiders: 37.92%”

Dirt cheap. As of Dec. 14:

  • Market cap of $11.7 million
  • Tangible book value of $22 million, and the majority of its assets are cash.
  • Revenue was $120 m.
  • Loss of roughly $3 m

The question is how much of that cash it will have to burn in setting up a profitable operation in China. Seems like a good gamble for the price.