STOCKREPORT (NASDAQ:HAND): 'A PDA a stock that sometimes gives you a HAND and may just give some investors the FINGER."
HAND is trading 93 dollars right now. There are a number of a factors that have put it HAND up to these crazy levels, all of which I expect to change.
1. HAND just had a whole bunch of news from the wireless trade show in Silicon Valley this week. That ended yesterday. The last run up was into the Chicago trade show. Yes there will be more shows, but for the most part all the plans and news are out. HAND at the first one put out the 300 dollar device that make it into a cell phone. A big bulky cell phone at that. And this week they announced the faster processor Visor and the color version. The news is out, and HAND's ability to put out product into the distribution channel for the holiday buying season is in question. Yes they will capture a section, but will it be compelling.
2. HAND is a clone maker of Palm, which signed a 5 year exclusive agreement with Palm. They cannot venture into the Win CE devices if they wanted. They pay 13 dollars for each unit sold to Palm. That is pure profit for Palm, no additional incremental costs for units sold. The products that they have are a larger form factor than Palms units, and do not have the designer look and feel of Palms. Remember there will be a Claudia Scheiffer Palm model sold exclusively in designer Aqua color. Putting computers in the hands of women has always taken effort, and Palm has done this, and is catering to the market. HAND is not doing these Marketing items.
3. The big buzz on HAND has always been the expansion slot. However most handheld users don't need this. Adding in a bulky costly phone is not that great of thing for most users. The phone cost 300, and it would likely replace a phone that already is purchased. The small size, which is the main selling point of palmsized computers, is wiped out. It becomes a hold with two hands unit. Traditionally manufacturers are less willing to make peripherals for proprietary ports. The reason why is that if sales do not meet expectations they are stuck with the hardware costs of putting the inventory out into the distribution channel. This is why the game pack for the expansion model is so crazy. The cost to put a software bundle on a store shelf is small, and with the web you can distribute game software for essentially free. The guy that goes with the springboard design, also has access to something like 10 percent of the market, while the software games have complete access. Besides connectivity to the Internet the expansion slot I expect go mostly un used. Palms have ports, and modems like the Omnisky units are already being used, so the advantages of the springboard are unclear, and the disadvantages of the design are.
4. Sony is launched its own Palm OS unit about a month ago. It is currently the Editors choice at www.cnet.com. It has an expansion slot that accepts industry-standardized modules. Unlike the springboard, the usage of “memory sticks” is a widely used standard that is quickly growing. Peripheral manufactures thus can make a digital camera that can be used in the Sony PDA as well as other devices that have adopted the standard. Sony is also a vastly experienced manufacturer of consumer parts, both in terms of quality and cost. They will have a color model soon, and I expect a low cost version as well. Thus the assumption that HAND is the only competitor to Palm is false. Hand is just making clones, and Sony is one heck of a competitor in that space. Sony can produce high volumes of consumer products at a profit, while so far HAND has not been able to profit and does not expect to for some time still.
5. HAND should be profitable; they are a manufacturing unit of a cloned part with very little market differentiation between itself and others. You don’t manufacture a clone and not profit, if you have loses, it means that there are serious spending issues that are out of control. This is not a market share item, every unit is a “win” for the Palm Operating System, the one that HAND only buys to use. That is the only market share that counts.
6. Besides Sony, Nokia, Motorola, and Kyocera are all entering this PDA space with PDA enabled phones. Again the number of entries jumps up, and the once only alternative to Palm is deluded. All of the above manufactures are world class. But I also anticipate that a Korean or Taiwanese low cost powerhouse clone maker will rush in for the low end volume units. Palm won’t allow this until the next generation is closer
Some PR news clippings:
“By the end of the year, Kyocera plans to release its Palm Powered cell phones that run on the Palm operating system. Kyocera will continue to make the pdQ phone originally developed by Qualcomm.
Recognizing that there is a finite audience for its core business of PDAs, Palm has revamped itself in the past year to beef up its wireless Internet service and partnerships. The handheld maker has focused on licensing its operating system to cell phone makers, such as Nokia, and other device makers, such as Sony and Handspring.
Motorola, Palm to make co-branded smart phone
SCHAUMBURG, Sept 22 (Reuters) - The world's No. 2 mobile phone maker Motorola Inc. (NYSE:MOT - news) and hand-held computer maker Palm Inc. (NasdaqNM:PALM - news) agreed to jointly develop co-branded mobile smart phones that provide access to e-mail and can store calendars and contact databases.
So on the technology side you have a clone unit using a purchased operating system, with a questionable expansion slot, competing with Palm and a whole bunch of other world class manufacturing companies that are incorporating the nearly the exact same feature set.
NOW TO THE STOCK SIDE:
The stock has a market capitalization of 11.6 Billion (with a B) dollars at the $93 dollar level. They are currently loosing money on each PDA sale, have not other business of which to speak to. According to Yahoo—
Shares Outstanding 125.4M
Float 10.0M.
Sales (ttm) $172.5M
EBITDA (ttm*) -$20.7M
Income available to common (ttm) -$67.5M
Per-Share Data
Book Value (mrq*) $1.55
Earnings (ttm) -$1.64
Earnings (mrq) -$0.17
Sales (ttm) $3.41
Cash (mrq*) $1.57
So the market cap is incredible, but there is no path to even come close to giving a return (profits) that can justify the stock price.
Maybe it’s a new economy thing: NO simply NO. The only market share being captured is by the Palm OS, not by the clone makers.
Maybe it’s a Christmas thing? Maybe, these PDAs should sell well during the holidays, that is fine, its good. Lets be really positive it’s GREAT. But here is the rub, for every unit sold by HAND this season, they as a company will lose money overall.
Let me say that again, for all of they hype of the holiday buying season, and all the sales by HAND, the piggy bank gets smaller. Call me old fashioned but I want the stock I own to have the piggy bank getting bigger. Businesses are established to make money, not create hype and sell stock. Well at least they used to be.
How about the great leaders of HAND and their desire to see the individual share holders do well. <--- Satire only
Some SEC filings snippets:
A few share will unlock 6 months after the Hand IPO date:
“115,253,728 restricted shares of common stock will be available for sale in the public market beginning 180 days after the date of this prospectus.”
Who owns them
“Of these shares, 102,980,142 shares are held by our directors, executive officers and other affiliates, and are subject to volume limitations under Rule 144 and various vesting agreements.”
Here is 60 Million of them, such a deal, such a deal.
“TRANSACTIONS WITH PROMOTERS
In August 1998, we sold 40,950,000 shares of common stock to Jeffrey C.
Hawkins and 22,050,000 shares of common stock to Donna L. Dubinsky at a price
per share of $0.00111 under restricted stock purchase agreements. On the same
day that they purchased their shares, Mr. Hawkins and Ms. Dubinsky transferred
their shares to trusts of which they are trustees. At the time of issuance, 80%
of the shares held by Mr. Hawkins and Ms. Dubinsky were unvested and subject to
our right of repurchase upon termination of their employment. On July 13, 1999,
this right of repurchase expired as to an additional 20% of the shares, and
continues to expire as to an additional 1.667% of the shares each following
month so long as we continue to employ Mr. Hawkins and Ms. Dubinsky, as
applicable. If we are acquired by, or sell all or substantially all of our
assets to, another entity, then our right of repurchase with respect to the
shares held by Mr. Hawkins and Ms. Dubinsky will expire as to an additional 25%
of the shares. On or before July 13, 2002, the right of repurchase will expire
in full.”
Conclusion:
First for the people that like pictures----- look at this chart, the bar at the end is 115 Million shares unlocking.
unlockdates.com
You many not see it just yet, but this is called a bell curve pattern, yes I know its only half of a bell now, but this is a bell curve chart. Or it’s a flying pig with golden wings flying to close to the Sun---whichever works best for you.
So HAND has a modest float of 10 Million shares now, but a massive chunk of 115M unlocking insider shares, HAND’s price has been pumped up on two wireless trade shows, announcements of “me-too” products, with a batch of seriously vicious world class manufactures also licensing the Palm OS. Hand takes a loss on every unit, and Palm rolls in 13 bucks licensing fee right off the top. The market cap is 12 Billion dollars, and the Christmas buying season is the last one with HAND being the de-facto competitor to Palm. I have not mentioned windows CE, but the Compaq IPAQ CE is sold out across the country. So after the Christmas buzz, the next quarter will not have profits, but will have 115Million more shares. Lots of supply of shares, how much demands do you think post Christmas.
Last line: If I held HAND, I would Sell it.
These crazy stocks, its just a mystery to why such high-flyers come crashing down, who would have ever though STMP would be where it is today.
The Truthseeker...................... |
