But who is Promethean World, LLC from a business perspective? Are they the Apple of the smartboard industry, or are they headed down the same path as Palm and Blockbuster?
A look at the Promethean World financial data (stock symbol PRW on the London Exchange) should give us some insight. It can be found at: http://www.bloomberg.com/quote/PRW:LN.
As an investment, PRW hasn’t been so hot. On the day of the initial public offering (IPO) 2½ years ago, the stock price declined from 2.00 GBP* to a market price of 1.96 GBP ($3.18 US). Today's price of 0.23 GBP ($0.37 US) represents a market price decline of about 88%. In comparison, the S&P 500 index (an indicator of stock prices in general) has gone up about 22% since PRW went public.
|PRW: Short sellers have done well with these shares|
A dollar invested in PRW when the company went public 2½ years ago would be worth about $0.12 today. A dollar invested in an average US company over the same time period would be worth about $1.22 today.
In the first half of 2012, PRW earnings were -0.73 GBP per share, which is -$1.19 per share. For a company the size of PRW, that's a huge loss.
To conserve cash, PRW recently stopped paying a dividend.
PRW is a fairly small company. The total market capitalization is 46 M GBP, or about $75 million. To put values in perspective, MCPS could buy the entire PRW company for less than what it costs to build one high school in Montgomery County.
Total sales for PRW in FY 2011 (the most recent full year reporting period) were 223 M GBP. Based on sales reported for the first half of 2012, they’ll probably see about 180 M GBP in sales for FY 2012. From a sales viewpoint, the recent BOE purchase authorization for $14.5 million of products from PRW (about 9 M GBP) is roughly equal to 5% of PRW’s sales for the entire FY 2012. (We do note, however, that the $14.5 million of products are expected to be delivered over a period of several years.) This means that MCPS is a huge PRW customer, possibly their largest customer in the world.
Which brings us back to the original question: Is MCPS saving Promethean World, LLC from financial collapse? Based on their most recent sales figures, if MCPS stopped buying Promethean products, Promethean’s sales would likely decline enough to materially affect the company's bottom line. But perhaps even more importantly from an MCPS perspective -- and a taxpayer perspective -- Promethean products rely on highly proprietary technology. Hence, the collapse of Promethean could turn the Promethean products that MCPS is purchasing today into the Palm Pilots of tomorrow.
* GBP is Great Britain Pound Sterling, the official currency of the UK.