It is strange that given the poor financial performance of this company that the company still carries 20mm of goodwill on its balance sheet. I wonder how the auditors view this "asset". It would seem that a huge write down of goodwill is in their future.
Ha I was emailing a friend about Bridgeline and I thought I would just vent ... but it turns out to be on topic
I hate the name iAPPS. I prefer their company name Bridgeline which is the first line the spider lays which is the foundation of the spider web. Seems apt for a web strategy to employ a Bridgeline. And besides with Apple nearing a trillion dollar market cap isn't iapps.com worth at least a million or two?
Sorry, I ignored the meat of your post regarding "Goodwill" on the balance sheet. Goodwill is regarded on the balance sheet of most tech companies. This definition is from Wikipedia:
Goodwill is an accounting concept meaning the value of an entity over and above the value of assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps from the reputation the firm enjoyed with its clients.
I looked at BLIN's competitor's (according to yahoo!Finance) Balance sheet "Goodwill" values and found the following:
Microsoft - Goodwill = $13.4 billion Oracle - Goodwill = $25.1 billion SAP - Goodwill = $11.3 billion
Granted these companies are much, much bigger than BLIN, but it just goes to show that having a significant amount of "Goodwill" on the balance sheet is not uncommon.
You don't seem to understand goodwill fully. Robp's comment is right on. Goodwill is created when you buy a company and pay more for the company than its assets are worth. This is common, as you often are buying an earnings/cash stream, not just assets. If the cash flow stream ultimately does not support the excess you paid (i.e. the goodwill), your accountants will force you to write it off. Given the sizeable amount of goodwill BLIN has, they have to have a pretty strong projected cash flow stream to support its continued value. To date, we haven't really seen these cash flows. I agree that at some point we're probably going to see a write down.
You need to listen to the latest conference call to understand the business plan over the next year. They are in a transition period. They are switching from a lower gross profit business model to the high gross profit - i.e. iApps Suite - business model. That is the reason for the poor financial reports. I think they have done a great job through this transition period.
35% yoy increase in iApps licenses. Gross profit increased from 51% to 56%. A yet to be named franchise with 4,000 franchises guaranteed to use the newly released iApps ds product. Just a few of the highlights.
Don't misunderstand me though. I don't think this stock will have any major movements upward for another 3 months at least as they won't release the name of this franchise until fiscal year 2013.