One of the things that I love about publicly traded companies is the amount of information that they have to publish in their regulatory filings. Combing through the gaboolgook of business speak, legal disclaimers and operating results probably doesn’t sound all that exciting, but it can be fun when you find secrets buried in the tediousness of it all.
The key to unlocking most filings, isn’t so much what they tell you, but what’s missing. If you look at the numbers that they do give you from different perspectives, you can often get a rough outline of the ones that aren’t there.
With this in mind, I decided to dig deeper into Research in Motion’s latest 6K filing, to see if I could find clues to some of the questions that RIM left unanswered when they acquired Dash Navigation. Rim’s purchase of Dash has always been shrouded in a cloud of mystery. Normally, acquisitions make front page news (or at least the front of Techmeme), but Dash and Rim both kept quiet for nearly two weeks, until Boy Genius saw details leaked in an industry publication. Even in their most recent 6k filing, Rim doesn’t mention Dash by name once.
What Rim does mention though, are some hard numbers that can help to fill in the blanks.
In the filing they tell us the following
-During the 1st quarter they purchased two companies. A company named Certicom and “a company, whose proprietary software will be incorporated into the Company’s software.”
-The two businesses cost RIM $124.4 million
-Out of the $124.4 million, $111 million was spent on Certicom
-They also spent $4 million in financing costs as part of the transactions
-Even though they only spent $124.4 million, they actually had to redeem short term investments of $136.4 million in order to complete the transactions.
-Part of the cost of the Certicom transaction was reduced by the $10.9 million in cash that they picked up as part of the transaction.
Since RIM admits to only making 2 acquisitions during the quarter, it is relatively easy to determine the purchase price of the company.
$124.4 million – $111 = $13.4 million
$13.4 million – $4 million = $9.4 million
In order to make sure that we take into account any cash that Dash may have had, you have to look at the difference between what RIM actually paid for both companies and what it actually cost them.
$136.4 – $124.4 = $12 million
Since Certicom had $10.9 million, it would suggest that Dash was left with a mere $1.1 million when they were acquired.
$9.4 – $1.1 = a purchase price of $8.3 million
When you consider that Dash raised $71 million in three rounds of financings, it’s easy to understand why they wanted to keep quiet about an 88% loss for their VC investors.
What is a little surprising though, is how good of a deal RIM seems to have gotten out of the transaction. One of the more interesting figures that caught my eye was an entry for a $26 million dollar tax credit picked up in “one” of their acquisitions. That’s right folks, by buying Dash for $8.3 million, Rim will get a $26 million haircut on their taxes. They actually had to book over $8 million in revenue during the quarter to reflect the immediate gain on their investment. The tax loss alone represents a 300% (overnight) return on the acquisition. No wonder RIM doesn’t want to talk about it, Dash seems to be more of an accounting adjustment then an actual play at their technology.
While I can understand why Dash and Rim wouldn’t necessarily celebrate this transaction, lets hope that they are being honest with us about implementing Dash’s technology into their products. Allowing consumers to share information, in order to better understanding real time traffic could really help to push GPS technology ahead. It would be a shame to see Dash’s legacy relegated to an unnamed footnote in a business filing.
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