A buy back is not necessarily a good use of cash and I am in the camp the would argue that insiders and institutions benefit rather than common shareholders. If a stock will face selling pressure trying to prop up share price will work no better than the government trying to prop up housing. If the corporation is well run and is making money share price will envntually follow. This whole market is in a cash crunch. My hope is we keep our cash which helps keep us strong. I also do not feel we need to be bought out. America needs good corporations which have the focus to get things done. Size is no indicator of strength in this economy.
Keeping a healthy cash cushion is prudent but $11 million (about 40% of the current market cap) is more than necessary. Excess cash parked in a money market returns investors 3% to 4%. The same funds reinvested in DAIO shares should do much, much better. The improved return benefits both shareholders and DAIO staff with options.
Regarding an acquisition, $9.25 is not outside the realm of possibility. It might, however, be a little much to expect in the current economic climate.
Using back-of-the-envelope math,DAIO generated $7 million in positive cash flow during the past 12 months. If the company were acquired it would save over $1 million each year in expenses required to stay a publicly traded company. If an acquiring company were targetting a 10% annual return, they could pay $90 million ($79 million net of DAIO's current cash) based on an $8 million positive cash flow going forward. That is the equivilant of $10 per share.
Using more conservative math that might better reflect the current economy, an acquiring company targeting a 10% ROI could pay $60 million for DAIO if the company averaged $5 million in positive cash flow going forward. That would equal $6.85 per share.
The current market cap would require $1.7 million in positive cash flow to support a 10% ROI for an acquiring company. With $1 million in publicly-traded-company-expense savings the flash programming solutions business would only have to generate $700,000 per year.
The company's intrinsic acquisition value is one of the reasons DAIO is currently undervalued.