Just as your pulse is checked during a routine physical, free cash flow is used as an indicator of a company's health. It equals the cash brought in from operations minus the money needed to pay the bills. Think about leftover money in your checking account after you pay this month's bills.

Investors and analysts see this leftover money as a gauge of a company's ability to perform. It is available for transactions such as handing out dividends and working on new products.

Some argue free cash flow is wrongly overshadowed by the emphasis often placed on earnings. Earnings numbers can be manipulated and don't always tell the whole story -- and earnings don't mean much if there's nothing left over after a company pays its expenses. Even if you bring in a six-figure salary, but no money left after paying the bills, are you in great financial shape?

You don't have to be Einstein to figure out free cash flow. To calculate the number, subtract the company's expenditures and dividends from its operating cash flow.

If the free cash flow is written in red ink, it doesn't necessarily signal curtains. This is common for young companies looking to grow. It also could be a result of heavy investments, which in the long run could be worth a standing ovation.

Home / Markets / Innovation

Thursday, April 03, 2008

Vending Machines Selling High-End Gadgets Pop Up Around Country

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Donna Fuscaldo

FOXBusiness

Forget about buying a can of soda or a bag of chips from a vending machine. Now you can get an iPod or a high-end digital camera.

In the last few years, vending machines selling high-end electronic gadgets have been popping up at airports, hotels, malls and department stores across the country.

The brain child of San Francisco-based ZoomSystems, these machines sell everything from $400 digital cameras to Apple’s (AAPL) iPod digital music players to even Sony Corp.’s (SNE) Playstation Portable PSP, and allow consumers to make a purchase without any human interaction.

“Consumers don’t want to wait in line and don’t want to deal with a person that knows less then they do about what they need,’’ said Gower Smith, chief executive of ZoomSystems. “It creates a very efficient way to get the products from the OEMs [original equipment manufacturers] directly in the hands of consumers.”

Currently Macy’s (M) is the only department store to sell iPods through ZoomSystems' vending machines. The machine, which sells the iPod Touch, Nano and Shuffle, iPod accessories, speakers, Belkin headphones, as well as digital cameras by Canon and Samsung, enable consumers to quickly get their hands on their electronic gadgets at the swipe of a credit card.

At airports, there are Sony-branded machines that sell the PSP and games, digital cameras, memory products, headphones and even Sony’s new digital book reader. Popular items purchased at airports include headphones, adapters and accessories, the typical things left behind by travelers, said Gower.

ZoomSystems’ vending machines use patented technology that melds a touch screen Web-based application with a robotic hand that fetches the gadget once you make the purchase. Using a robotic hand eliminates the chances of the item being damaged in transit. In traditional vending machines, the item, whether it’s a can or soda or bag of chips, simply falls to the bottom of the machine.

The payment pad on the vending machine provides product specifications, and in the case of digital cameras, gives comparisons of the products being offered. ZoomSystems offers a 30-day money back guarantee as long as you have a receipt, although the consumer has to foot the bill for the return shipping. Gower said the return rate is typically lower than other retail channels.

There’s a 1-800 number on the machine, which offers instant help if your receipt fails to come out or if you have any problem with your purchase. Using optical technology built into the machines, a consumer’s credit card won’t be charged unless the product is physically removed from the vending machine, according to the company.

Given the high price of some of the items sold -- the iPod Touch, for instance, sells for $299 -- you might think consumers would be reticent to make the purchase out of a machine. But ZoomSystems CEO Gower said sales are climbing, even at a time when retailers are taking a hit.

“At a time of retail doom and gloom, same store sales growth in the last six months has been above 20%,’’ said Gower. “There’s a rising tide in consumer acceptance. We’re breaking world records on revenue per square foot.” Gower, who likens initial resistance to the early days of ATM machines, said the Internet has played a role in building consumers comfort level in making purchases without the hand holding.

“A lot of consumers research on the Web and know what they want," said the executive. It doesn’t hurt that the vending machines only sell well-known brands that have a proven track record. “We select brands that are the most popular in their category,’’ noted Gower.

Envisioneering Group, a research firm out of Seaford, NY, which tracks sales at ZoomSystems, has found the vending machines are popular with travelers who like the speed and convenience of not having to wait online or get a salesperson to retrieve the item for them.

“There’s very few returns and almost never a line," said Richard Doherty, research director at Envisoneering, noting that the brand name on the products drives the sales. “No one dares to try and do it with less known brands. You’re talking about Apple and Belkin, which are known brands and have internal warranties.”

At Macy’s, having an electronic vending machine, which the company calls e-Spot, fills a need for the department store chain. Macy's doesn’t have its own electronics department and the machines are typically in a location far from the nearest Apple or electronics store.

“Customers overwhelmingly tell us they love the ability to compare products and make purchases at their own pace," said a Macy’s spokesperson in an email. “We are in the process of expanding the number of stores with e-Spot shops specifically because customers have requested them.” Macy’s noted that returns are almost “nonexistent.”