Motorola Keeps Destroying Value

It was reported Wednesday that Motorola (MOT) is shopping around its division that makes set top boxes and other equipment for cable and phone companies. The rumored asking price is around $4.5 billion.

That sounds great, but unfortunately for Motorola and its shareholders, the company paid $11 billion for it 10 years ago. Read how management gushed over it back then:

"This partnership will enable us to expand our portfolio for network access, delivering next-generation solutions along with 'home hubs' that will handle high-speed Internet access and video entertainment, as well as carrier-quality voice services," Motorola chief executive Christopher B. Galvin said. "People want access tailored their way and the ability to get online quickly and simply."

Some might say that Motorola didn't really pay $11 billion since it issued its own stock to complete the purchase. This is nonsense of course.

Deals like this might be a contributing reason to explain why Motorola stock has been a disappointment to many investors.

Author's Disclosure: none.

Comments

[nyoneway:]

It's not really fair to say MOT destroyed value when the entire set-top box market has been declining over the years. If you bought a house in 2005 and you sold it in 2009, does it mean that YOU destroyed value? Also if you consider all the profits made over the years, it could very well be a wash.

Nov 12 08:07 AM

[Eric Fox:]

Perhaps Motorola management should have considered that the sector was overvalued at the time due to investor hysteria over the Internet, instead of listening to short term oriented investors and analysts who kept telling them they had to get into this business.

Nov 12 09:57 AM

[Kris Tuttle:]

Motorola management may be changing. They key to how well they can do from here depends on what they do going forward.

Nov 12 10:53 AM

[TinyTim:]

What are the chances of them finding a buyer for the old General Instruments?
About the same as the cell phone div a few months ago. Although they should try again with all the Droid hype.

Without detailed analysis, one factor that shouldn't be discounted is - they need the cash. This happened eight years ago when they spun off the government electronics business to General Dynamics. Defense is a nice, stable sector right now. They probably wish they had sold something else.

Chris Galvin was in way over his head. The grandchildren usually don't survive in family businesses.

It's amazing how many technologies Motorola created, developed and took a swing at, only to whiff in the market for one lame reason or another. Only to have another company make a killing on the same idea.

If they sell set-top boxes and cell phone, what's left?
First responder radios and cell phone infrastructure?

Nov 12 03:04 PM

[jack dee:]

if they sell the cell phone div, that is pretty much me finished with MOT. It is the only reason I took position.

Nov 12 03:42 PM