Palm Computing Inc - Case Study Example

Palm Computing Inc. Part I- Background 1. The legal name of Palm Inc is Palm Computing Inc. 2. The SIC code of the company is 3575. 3. The company is located at 950 West Maude Avenue Sunnyvale, California 94085. 4. The company is incorporated in California, USA. 5. The fiscal year for the company ends on May 31. Part II- Filings 1. The different kinds of reports filed by the company in the last twelve months are Current Report, Quarterly report, Annual Report. 2. The company filed these reports a number of times with the SEC. The total number of reports is thirty-one. 3. The Current Reports were filed the most number of times during the year. 4. These reports contain information about the financial operations of the company. It is filed the most number of times to inform about any changes relating to appointment, departure and election of Directors or Principal Officers. Part III- Annual Report in Form-10K 1. The 10-K was filed on 24 July, 2009. The company has filed it before the due date. The company filed it 21 days before the due date of August 14. 2. The 10-K covers a period of twelve months. 3. The 10-K gives information in four parts which include details relating to business, Risk factors, Unresolved staff comments, properties, legal proceedings and submission of matters to a vote of security holders in Part I; Market for Registrar’s common equity, related stock holder matters and Issuer Purchases of equity securities, Selected financial data, Management’s discussion and financial analysis and results of operation, disclosures about market risk, Financial statements, changes in disagreements with Accountants, Controls and Procedures, Other information in Part II; the names of Directors, Executive Officers and Corporate Governance, Executive compensation, Security ownership, Accounting fees and services in Part III; lastly Exhibits and Schedules in Part IV. 4. The financial statements are included in Part II of 10-K. 5. The auditors of the company are Deloitte & Touche LLP. They report to The Board of Directors and Stockholders of Palm Inc. Their opinion is a ”qualified” opinion. No, the auditor do not provide report on anything other than financial statements 6. The management is responsible for the financial statements 7. The CEO and CFA are required to make certifications regarding the filing. For Palm Inc, the certification has been done by Chief Executive Officer, Jonathan J. Rubinstein and Chief Financial Officer, Douglas C. Jeffries. 8. They have to certify that to the best of their knowledge, the report does not include any untrue statements or has excluded any material facts. They certify that the reports give a fair presentation of the financial condition. They also accept the responsibility for the maintenance and establishment of the reports. Part IV- Balance sheet 1. The dates or periods included in the Balance Sheet are May 31, 2009 and May 31, 2008. 2. The company has presented figures relating to the previous year 2008 along with the current year figures in the Balance Sheet. It has been are presented in a tabular format depicting Assets and Liabilities and Stockholders’ equity (Deficit) 3. The company’s growth rate for the periods covered by Balance Sheet is negative…… 4. The important assets of the company are Good-will, Property and equipment and other intangible assets. Palm Inc. is a mobile device company. The main asset of a mobile company is its Good-will as the company’s revenue is most impacted by the loyalty of its customers. A high value of Good-will for the company means that the company has a good reputation in the market. 5. The risk of the company can be measured by the debt position of the company as higher amount of debt exposure can burden the company. The long term debt of the company has moved down to $390 million from $394 million in 2008. This can be interpreted as a fall in risk as the company’s debt component has declined by nearly 1.01%. 6. The Stockholders equity consists of Preferred stock of 125000 authorized shares, Common Stock of 2000000 authorized shares. The different classes of ownership are Common Stock and Preference Stock. The company is authorized to issue 2000000 shares of Common Stock. The company has till date issued 139687 and 108369 shares out of its authorized limit. The company has repurchased shares of 2000. The ownership position has changed from $108000 last year to $140000 in 2009. Part V- Income Statement 1. The periods covered in the Income Statement are 2009, 2008, 2007. The balance Sheet dates include only 2009 and 2008. 2. The Income Statement includes Revenues, Operating expenses, Operating incomes (loss), Net Income and Basic and Diluted EPS. 3. The components of profitability in the Income Statement include Net Income (loss) and Gross profit. The gross-profit of the company has declined from $401 million in 2008 to $159 million in 2009. The Net loss of the company has increased significantly in comparison to the last year. The net loss for the current year is reported at $753 million. 4. The company has disclosed the Earning per Share (EPS) in two heads – Basic and Diluted. The company has reported a negative EPS of $6.51 for the current year. The EPS is calculated by dividing the net income (Loss) by the number of outstanding shares. This has been disclosed by the company in the Consolidated Statement of Operations. Part VI- Comprehensive income 1. The company has provided for a statement of Comprehensive income. The Statement of Consolidated Income includes the following heads – Additional paid-in capital, Unamortized deferred stock-based compensation, Accumulated deficit and Accumulated other comprehensive income (loss). 2. The Other comprehensive income for the period is disclosed at12.53million. 3. The balance of Accumulated Other comprehensive Income is $413.865 million. Part VII- Other Statements and Notes 1. The company has provided for an audited statement of Cash Flows in the 10-K. the periods covered are 2009, 2008, 2007 for the year ended May 31. 2. The company has disclosed the Statement in a tabular format including heads like Cash flow from operating activities, Cash flows from investing activities, Cash flows from financing activities, Supplemental cash flow information, Non-cash investing and financing activities. 3. Yes, the company has disclosed non-cash transaction for the period. The non-cash transaction disclosed by the company is “Liability for property and equipment acquired”. 4. The Cash flow from the investing activities is negative and from the financing activities is positive. The pattern of cash-flows is typical as the company is trying to expand its operations. 5. The audited statements provided by the company are Consolidated statement of Operations, Consolidated Balance Sheet, Consolidated statements of Stockholders’ Equity (Deficit) and Comprehensive Income (loss) and Consolidated Statement of Cash Flows. 6. Twenty-four notes have been provided for the financial statements. 7. The company operates in one reportable segment that designs, develops and markets the mobile devices along with the accessories. 8. All the segments are closely related to the main industry. 9. The data given for the segments are Revenues, Net Income (loss) and Total Assets. 10. The company has not reported any “Subsequent Events” in the notes. 11. The company has disclosed quarterly information in the notes. The data given in the quarterly statements include three months ended Revenues, Gross profits, Net loss, Accretion of series B and C redeemable convertible preferred stock, Net loss applicable to common shareholders, Net loss per common share and Shares used to compute net loss per common share. Part VIII- Ratios 1. The Current ratio of the company is 1.032 and 1.312 for the years 2009 and 2008 respectively. The Quick ratio is 0.974 and 1.149 for the years 2009 and 2008 respectively. 2. The debt-to-equity ratio is 0.878 and 1.254 for the years 2009 2008 respectively. 3. The price-to-earning ratio cannot be calculated for the company as the company has recorded a negative Earning per share (EPS) for both years and a negative EPS has no meaning. The par value of the company is $0.001 giving a market-to-book value ratio of 17460 (YahooFinance, “Palm, Inc. (PALM)”). 4. The liquidity position of the company is satisfactory based on the current ratio position of the company. It was better the previous year at 1.312. This shows that the company is capable of taking care of its short term obligations. The company’s debt-equity ratio has declined compared to the previous year. This shows that the company is reducing its exposure to the debt component and so in terms of risk the company position has improved relatively. The growth potential of the company is satisfactory based on the extensive investment activities undertaken by the company. Annexure (in thousand) 2009 2008 Long term debt($) 390 394 Fall in risk -1.0152 (in thousands) 2009 2008 Current assets ($) 353579 540086 Current Liabilities($) 342442 411346 Current Ratio 1.03252 1.31297 Inventories($) 19716 67461 Quick Assets($) 333863 472625 Quick ratio 0.97495 1.14897 Debt($) 751302 813571 Equity($) 855807 648504 Debt to Equity ratio 0.87789 1.25454 Price($) 17.46 EPS($) -6.51 Market Price($)- 17.46 Book value($) 0.001 Market-to-Book ratio 17460 References YahooFinance, Palm, Inc. (PALM). 2009. Investing. October 30, 2009. . 5. Read More