Firm notes that after conducting channel checks following last week’s negative pre-announcement, they believe the worst is now over at Motorola. They think all the bad news is now fully priced into Motorola’s stock price, and over the next several quarters they expect to see an improvement in earnings growth, meriting a Buy rating. In particular, the firm expects the final rationalization of the company’s management structure, a new firmwide emphasis on earnings and a clearing out of inventory and mis-priced/placed products.
While Mobile Devices [MD] continues to under perform, checks indicate thatin regions where the company did not have to offer price protection to the channel (for clearing stocks), they saw QoQ improvements in handset margins. With excess products now largely removed, they think margins should stabilize.
DB believes the company is nearing the end of its purge in senior management. While overall jobs cuts are not over, they think MOT will soon see a consolidated vision for improvement. Changes such as moving the head of supply chain to run MD indicate they are now serious about structural changes to their cost structure.
Notablecalls: An elegant move on Deutsche's part. Upgrading ahead of the turn has always made the most dough for the clients. I expect to see at least 1pt move to the upside following this call.
Now all we need is some cool handsets from the Moto labs.
MOT 1-yr. chart: