RBC Analyst: Motorola's Non-Handset Broadband Home Solutions Division a Winner

There's a lot of positive things going on in Motorola Inc.'s (MOT) non-handset Broadband Home Solutions [BHS] division, which oversees the company’s digital video, IP video and broadband operations - says RBC Capital Markets analyst Mark Sue.  In a research note Thursday he said that he came away feeling positive after a recent meeting with the Senior Vice President and General Manager of the unit, John Burke, who outlined higher sales and improving margins this year.

Despite an ongoing reorganization within Motorola, Mr. Sue said that the BHS unit “seems to be showing strong execution,” helped by increased opportunities in China, Japan and the rest of Asia.

Motorola also believes global VOD subscribers could grow from 58 million in 2007 to 165 million in 2011. And with wider broadband adoption in international markets, the analyst said the rollout of the latest version of Data Over Cable Service Interface Specification [DOCSIS] – an international standard the allows addition of high-speed data transfer to an existing cable TV system - “may be sustainable for the next several years.”

 

Rapid growth in the adoption of High Definition [HD] television will also help Motorola’s BHS division . The number of HD households is expected to grow at an annualized growth rate of 42% over the next three years, while total HD set top box and digital video recorder shipments should grow at a rate of 39% over the same period.

Mr. Sue said:

Motorola maintains its leading market share in cable and IPTV boxes and believes the total pie is growing, so a win by the telco does not mean one less set top box for cable.

 

For the company as a whole, Mr. Sue still maintains a “perform” rating, sayig that it is trading at 0.5 times his 2009 estimates and 25 times earning estimates “that remain highly variable.” His price target is C$10.