Cobra Electronics (COBR) annouced quarterly results on Thursday. Revenue was up a little. Net income was up a lot, but mostly due to one time events. The market wasn’t impressed and the stock fell 8%. Day to day price changes don’t worry me, so that’s not what I’m writing about. I mentioned back in July that I was concerned about the cash hoard that Cobra was amassing. Specifically I said:
Cash is up. You’d think this would be a good thing, but whenever a company starts piling up cash, they start talking about … acquisitions. Management wants to take advantage of their current distribution channels with a new product. They don’t think there is much room for internal growth. Acquisitions are troublesome, because they’re difficult to do properly and because there’s so much management incentive to do them. In addition, it’s difficult for the outside investor to see how an acquisition is really doing. I’d rather see them doing a dividend or a buyback and focusing on internal growth.
I’m happy to report that Cobra has not done any acquisitions and much to my surprise has actually instituted a dividend of 16 cents per share. Woo Hoo! Is someone on the Board reading my blog? This dividend will still leave them with a lot of cash, and they are still talking about searching for acquisitions, but the fact that they’ve sat on 6+ million in cash without doing anything yet tells me that they are being careful about finding the right acquisition.