PLT: Plantronics Can’t Pull a Quick(silver) One On Investors

By William Trent, CFA of Stock Market Beat

Unfortunately we didn’t reverse our bullish position when we noticed the odd Oracle/Plantronics lovefest.  It nailed Oracle’s (ORCL) miss, and we should have sold Plantronics (PLT) on superstition alone. Instead, we are left with the thin gruel of a partnership with Quicksilve (ZQK):

The new collection integrates Quicksilver’s outdoor sports apparel with Bluetooth-equipped mobile phones, iPods and MP3 players. The goal is to make the components wireless to make use in active settings, such as skiing, easier.

Earth to Plantronics (company management apparently accompanied their headset to the moon): any skier who needs Bluetooth clothing probably already bought a pair of Oakley (OO) Thumps. And no, investors were not so enamored with your breathlessly announced deal to ignore your earnings report. Revenues of $215.4 million beat the $210 consensus but were down from $222.5 million in the third quarter of fiscal 2006. Thanks again (sarcasm) for spending your cash flow on Altec Lansing. The company’s guidance also came in well below analyst expectations.
Given the cash flow disclosure provided, it looks like the company produced about $25 million in free cash flow during calendar 2006, meaning that its $900 million enterprise value gives it a rich valuation of more than 35x free cash flow, and the conference call discussion indicated little opportunity for significant improvement in the coming year.

Disclosure: Long PLT at time of publication.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

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