what is wrong?, page-2

Hi Timbowls.

Good point. But of that $29m of book value, $16.7m is goodwill from (possibly overpaying for) acquisitions. A further $3.2m is from capitalised development expense. These intangible assets can be rapidly written down if they fail to deliver a return on investment, creating a sharp decline in value.

This in itself would not be an issue if the company was perceived to be growing returns. However, in my limited understanding of such matters, I think the move to smartphones might impact on the return on assets. If this is the case, it has the potential to result in further impairment of intangible assets.

What is more certain than my limited understanding is that the company has made comments in its FY report which include "...a challenging FY2010" and "...revenue and margin pressure".

In these situations, most investors will stay away unless they have particular reason to believe that management are being conservative in their views.