Motorola Upgraded: Turnaround Ahead?

Jun.23.09 | About: Alphabet Inc. (GOOG)

Motorola (MOT) shares are getting a boost from Bank of America/Merrill Lynch analyst Tai Liani, who Tuesday morning raised his rating on the stock to Buy from Neutral, setting a price target of $9, up from $7.

He cites four reasons for the upgrade, most of which boil down to a belief that the company is on the verge of staging a turnaround in its troubled handset business:

  • There are new handsets coming in Q4, including smart phones based on the Google (NASDAQ:GOOG) Android operating system.
  • The stock’s revenue multiple should improve as the handset portfolio shows progress. He is modeling a rebound to 8% handset market share in 2010, from 6% now, which would take the company back to 2008 levels.
  • Aggressive cost controls should exceed the company’s target of $1.7 billion for this year. He expects drastic cuts in wireless infrastructure R&D spending.
  • He also notes that the company’s non-handset businesses are slow growth but very profitable, and account for 60% of total sales.

MOT Tuesday is up 22 cents, or 3.7%, to $6.25.

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