William Trent_

Motorola's Warning: Unmitigated Disaster

Well, to start off I'd say everything is a takeover target these days. Google would never want to bother with an "old" style manufacturing company, though. If they do phones they would do the design and contract out manufacturing. But at 6.4x EV/trailing EBITDA MOT easily fits the bill for a private equity buyer, assuming that buyer believes the EBITDA decline that will happen this year will be overcome.

At 11x 2006 free cash flow the enterprise value is implicitly assuming the company can grow at a modest rate (say 2-3% annually) going forward. It is not an outrageous assumption, but first a big decline will have to be recovered. That's where the sticky bit comes in - how long will it take to return to peak sales and EPS, and when they do will it just be another peak or will they be able to continue growing past it?

To me, MOT looks reasonably priced but not compelling. The private equity buyer argument does make sense, though, as they could instill the financial discipline the whole industry needs.

iPhone Versus the Rest: More Evidence Smartphone Makers Are in Trouble

Oh, I see... unit growth. Well, whoop-de-doo! They are selling more units because they lowered the price. Its revenue growth that is going to drive earnings growth, which will ultimately drive the stock. The way they are going they'll sell 2 million units, have declining revenue and negative earnings.

That sure contradicts my thesis. Not.

iPhone Versus the Rest: More Evidence Smartphone Makers Are in Trouble

What are you smoking? One year ago Palm did $388.5 million in sales, this year they did $410.5. That is 5.6% using my math. If you are talking sequential growth they did $392.9 million in the November quarter, so the sequential growth was only 4.5%. And the January quarter includes the holiday sales season and is presumably the strongest.

Maybe it was the guidance? $400-$410 marks a sequential decline and a midpoint growth rate of 0.5% over last year's $403.1 million. Oh, and the consensus estimate was $416.

If it weren't for buyout rumors there is no way they would be selling at 21x trailing earnings.

iPhone Versus the Rest: More Evidence Smartphone Makers Are in Trouble

The problem is, many people will at least want to wait to find out for themselves whether the iPhone interface is better. Some will find that it is, some will find that it isn't, but in the meantime the wait can freeze out sales of other models. And given Apple's track record in designing intuitive user interfaces, its a safer bet that it <em> is </em> incredible than that it isn't.

As far as the "wealth of phones that can play music and receive calls," well that is also indicative of the intense competition, which will mean a real hurting if consumer spending slows further.