Are Motorola Shares a Bargain at Nine Bucks?

I haven’t considered Motorola (MOT) a viable investment opportunity for a long time, mainly due to the overly competitive market environment for the company’s core cell phone business. Not too long ago Nokia (NOK) and Motorola dominated the cell phone market and both stocks did well.

In recent years, however, the market landscape has changed. Smart phones like the Blackberry, iPhone, and Treo have taken share. A slew of Asian manufacturers have also played a role, with Samsung, LG, and Sanyo selling far more phones in the U.S. than they ever have before. As a result, MOT has seen cell phone share sag, profits plummet, and a stock price of about $9, down 65% over the last two years.

With the help of activist shareholder Carl Icahn, Motorola has been persuaded to split up the company. The cell phone business is bleeding red, distracting investors from the company’s profitable home and enterprise broadband and mobility divisions. In 2007, the cell phone business lost $1 billion on sales of $19 billion. The other business lines (cable modems, set top boxes, etc) actually earned $1.9 billion on revenue of $18 billion. Few people probably realize that cell phones are only half of the story at Motorola. Perhaps a spin off will help with that.

Down around $9 per share, I couldn’t help but want to take another look at the stock. Along with a market value now of only $22 billion, MOT actually has net cash of more than $4 billion, or about $2 per share. I’ll share some of my numbers with everyone in coming days, but until then feel free to share your thoughts on Motorola as a value play down here in the single digits.

Full Disclosure: No positions in the companies mentioned at the time of writing

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2 Thoughts on “Are Motorola Shares a Bargain at Nine Bucks?

  1. Bobby Kolev on March 27, 2008 at 9:52 PM said:

    I don’t think they are.

    MOT lacks leadership and especially inovation.

    Splitting may improve things, but betting on success now is like playing lottery.

    (Kind of like betting on Palm’s recovery, only even worse, for we know at least a few very creative people are still with Palm.)

    The profitable MOT unit will likely gain once the split happens; I can’t make a good point on whether it’s good to buy know because of that, but I certainly expect them to raise.

    The mobile phones unit better be left as is until we see what will it decide to do with itself.

    Without significant a change in attitude and creativity that half may as well end up being bought by an Asian brand in a few years.

  2. Anonymous on March 28, 2008 at 12:54 PM said:

    Well, their TV side of the business is rock solid. They are literally minting money on the TV business. The biggest cable operator COMCAST is their biggest customer. Upstart in Video Verizon is a growing customer. The cash generated in the TV business is compelling enough to buy the split business.

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