Investors Pricing Motorola Above $3 Should Think Again

While Motorola (MOT) is busy with redundancies and cost cutting measures, what catches my mind precisely is the fact of its effectiveness. In a couple of days, earnings are out. Let's preview some key figures, as estimated by me:

1. Sales should have dropped to $7.1 Billion.

2. Mobile devices, as in the previous quarters, would have posted a loss of at least $550 million. Handset sales should be down to 18.8 million units.

I would't be surprised if the company does not guide for upcoming year. With the economy still at just the possible midway point of a massive downturn, there's still downside for the stock. This makes a recent Goldman upgrade questionable, my rational of argument being the fact that dealers have still not been able to flush holiday inventories and the inability of distributors and consumers to get credit, putting downward pressure on ASP. On the top line, Motorola still did not get to the root of addressing basic issues of usability and simplicity coupled with buggy software glitches, thereby keeping value-demanding consumers at bay.

The CEO and Co-CEO's job of finding a buyer for the handset business in the current economic environment is anybody's guess. While I estimate the recent 4,000 layoffs would add to cost savings by 2011 onwards, investors patience will be really questioned by that time. In the meantime investors pricing the share above $3 should think again.

As always buying puts for earnings season are recommended.

Disclosure: None

Comments

[krish75:]

Mot is not just mobile devices. There are enterprise mobility divisions that are performing well.

Jan 26 11:12 AM

[nmelendez:]

Mot is done in the cell business. They should sell to msft. Csco has them beat in the cloud computing and they're enterprise mobility division is being cut to shreds by overseas cheap competitors. I do not know if they have they're proprietary chips but apple is now using Intel. My belief, unless Mot finds another niche to expand into they're toast.

Jan 27 05:57 PM

[iPWR:]

are you kidding? Mot already in $3~4, you recommend shorting the stock? Then what's your range to recover?

Jan 30 08:30 AM