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3:12 pm
December 31, 2011
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Jae Jun
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Post edited 7:17 am – December 31, 2011 by Jae Jun
iGo, Inc. (iGo) is a provider of accessories and power management solutions for the electronics industry. As of December 31, 2010, the Company marketed its electronics accessory products in three categories: power, protection and audio. It also markets other mobile electronic accessories, including laptop cooling stands, mounts, and mini-projectors (also known as pico projectors) that attach to mobile electronic devices for displaying video. iGo primarily sells its products through retailers, such as RadioShack, Walmart, Office Depot, Hudson News and Inmotion Entertainment; resellers, such as Ingram Micro, Inc., Microcel, and Superior Communications, and directly to end users through its iGo and Aerial7 websites, http://www.igo.com and http://www.aerial7.com. In August 2010, the Company acquired Adapt Mobile Ltd. In October 2010, the Company acquired AERIAL7, a designer and marketer of headphones for mobile electronic devices and professional audio equipment.
Business Overview
- Company makes after market power (laptop power adapter, phone
chargers), batteries, audio (ear phones), protection (skins, cases,
screen protectors)
- Highly competitive and commodity business. No moat or advantage in any of the products. Maybe the power adapter, but not really.
- Theoretically for this type of business, the only competitive advantage would be distribution channels and pricing.
Risks
- Wal-Mart is the biggest customer. Lose Wal-Mart and the company is finished.
- Revenue from Radioshack continues to decline
- Commodity business. A better competitor could come along any time. Batteries, audio, protection products all suck.
- Volatile business. Retail business. Subject to macro.
- Recent acquisitions worth it? Will it work?
Management
- management compensation levels are fair. Does not exceed 3% of revenues.
- open market purchase by President/CEO Heil in Dec.
Financials
- lost more money than made
- SG&A rising offset by cost of revenues
- R&D expense decreasing
- bad returns. ROE in the low single digits, CROIC regularly in negative territory
- DSO has increased dramatically
- inventory turnover decreased
Valuation
- same thoughts as when I held it in 2009. Business and management sucks.
- Only thing going for it is the asset valuation.
- NCAV is $0.88 vs current $0.77. Net net (NNWC) value is $0.62.
- Wouldn't buy IGOI at anytihng other than 10-15% below NNWC value.
Other
A lot of hope seems to be placed in the partnership with Texas instruments in energy saving chips, but that is too far down the road. Even if you try to put a value on that relationship and the growth that "could" come out of it, it isn't worth it.
Verdict
Business : C
Risk: C
Management: C
Financials: D
Valuation: C+
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