love motorbikes.

Bulls can almost be forgiven for mistaking noise for music. Harman shares have levitated 200% since March to about 29, but remain well shy of the $120 a-share price tag some buyout firms offered two years ago. Even after these firms famously balked and called off the deal, hope persists that the healing credit markets will spring another bid. Just last month, the stock spiked on chatter that a furtive Arabian investor had rounded up a furtive Korean buyer to make a furtive run at Harman. Such speculation has driven shares well beyond their worth. Harman has cut costs, and its auto stereo unit has good brands like JBL, Infinity and Harman/Kardon, but rising competition and shrinking margins thwart its return to profitability. With automaker customers increasingly cost conscious, Harman may not see peak margins in the low-teens again. "We think Harman is priced for a combination of revenue and operating margin in 2011 that is overly optimistic," notes Credit Suisse analyst Christopher Ceraso, who values the stock at 18. The cash for clunkers program has revved up car production -- and false hopes. Harman stereos find their way into everything from Aston Martins to Volvos, but the lower-end Ford, General Motors and Toyota models that benefit most from the government's program aren't big customers. What happens once the program ends and artificially accelerated demand stalls? Harman's enterprise value is a whopping 30 times its Ebitda (or earnings before interest, taxes, depreciation and amortization). "In my opinion, once the stock market becomes soft, investors will realize how ridiculous its valuation is, and they will run for the exit," says Michael Goldman of Abbot Capital Partners. "You won't even need JBL speakers to hear that noise."

Relational Investors decreased its ownership to 3,000,200 shares (4.33%), after selling 499,800 from May 19 to May 22 at prices from $16.88 to $18.05 per share.

Relational Investors believes that underperformance by prior management and negative trends in the automotive industry has led to Harman's undervaluation. Relational endorses current management's restructuring plan, and believes in its ability to execute. Relational will closely monitor management's progress; if success becomes unlikely, Relational will urge Harman to consider strategic alternatives.

Harman (HAR)? Private equity wanted that stock in the $50s. They can have all that they want at $9.

GOOD COMPANY LOW PRICE

GOOD COMPANY LOW PRICE

GOOD COMPANY LOW PRICE

Harman International (HAR) was downgraded from Outperform to Peer Perform, Bear Stearns said. Estimates also cut through 2009, to reflect deteriorating fundamentals. Buyers are likely to stay on the sidelines.

GPS Devices Throwing Harman Off Course
Michael Comeau and Brittany Umar discuss why Harman lowered its full-year guidance and what this means for GPS products in general.

Click here to watch the video.

bad electrics

Harman rhymes with Garmin, and the strong dollar and weak auto markets are killing it.

"Three big deals that still look dicey are SLM (SLM), the student lender; Tribune (TRB), the newspaper and TV company, and Harmon International (HAR), a maker of audio products."