Analysts Applaud Motorola's Buyout of Symbol

Includes: GOOG, SBL
by: Eric Savitz

Eric Savitz (Barron's) submits: Better late than never, here are a few worthwhile comments from the Street on Motorola’s (MOT) $3.9 billion all-cash deal to buy bar-code scanner company Symbol Technologies (SBL).

The bottom line is that Wall Street seems to like this deal; at the moment, the Street seems to like everything about Motorola; a run-up in the stock price has triggered a bunch of price target increases from the company’s analysts. (Including Deutsche Bank and RBC on Monday.) There were more today - although take note that at least one analyst has reservatons about the deal:

* Bill Choi, Jefferies:
Motorola is a primary beneficiary of the resilient handset market, which we believe could grow 20% this year, 15% sequentially in [the second half]. We see [Motorola] gaining share and expanding margins with new product line-up in [the fourth quarter]…Deal values Symbol at 1.9x CY07 EV/sales and 25x CY07 EPS on consensus estimates. Motorola would still have over $6 billion in net cash ($2.50 per share)…Deal could be accretive by [two cents a share in 2007…We note management expects cost synergies of $100 million in 2008…Increasing price target to $30 from $25.

* Tal Liani, Merrill Lynch: In our view, the acquisition reinforces Motorola’s ability to address the enterprise mobility market, which Gartner projects to grow from $15 billion in 2005 to $33 billion in 2010, or 15-20% per annum. From a high level, the Motorola/Symbol combination brings together Motorola’s expertise in public and private networks and Symbol’s enterprise focus. Symbol brings products such as rugged mobile mini-computers, data capture terminals, radio frequency ID (RFID) development, wireless infrastructure (Enterprise WLAN) and mobility management, all of which fit well with Motorola’s own enterprise mobility focus. At Motorola’s recent analyst day, the company discussed its plan to better penetrate the enterprise market. We believe this transaction puts the company well on its way to executing this plan.

* James Faucette, Pacific Crest: We estimate that the acquisition could add approximately three cents to EPS in 2007 and about five cents in 2008…cash payout does not inhibit other activities. Motorola had more than $10 billion in net cash at the end of Q2 and indicated that the acquisition would in no way inhibit the company from fulfilling its stock repurchase program.

* Inder Singh, Prudential: We believe that MOT is paying a high price for the acquisition, purchasing Symbol for roughly 25x 2007 consensus earnings. Consensus estimates show that Symbol is expected to grow in the 7%-8% range for the next two years, which is lower than Motorola’s expected growth rate…Although the acquisition may leverage some of MOT’s experience in mobile devices and diversify the company’s customer base, we feel that Symbol’s enterprise focus may present some difficulty in the near term because MOT’s previous focus has largely been on service providers and consumers.

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