Wall Street's Take on Motorola

In his research note to yours truly, RBC Capital Markets Managing Director - Mark Sue states:

"A sharp reduction in demand, share loss and our view that things may not improve during the second half means more estimate reductions for Motorola. Overall handset demand is deteriorating in our view, and Motorola may see its market share shrink further due to its lack of competitive products. A glimpse into Motorola's portfolio for 2H09 yields some promise, yet the overarching decline in demand and the subsequent sharp increase in competition may mean its more a 2010 recovery story for Motorola in our assessment.

"For the current 1Q09, we are reducing our unit assumptions for Motorola from 15M units to 14M or a sequential decline of -27%. Consensus for the quarter currently remains at 16.4M. Subsequently, our revenues decline from $5.6B to $5.4B, loss of ($0.12) remains unchanged as we believe Motorola remains disciplined with cost control. For CY09, we're assuming Motorola may ship just 60M units (-39% YoY) vs. the consensus of 70M units and 100M units in 2008. Our new CY09 revenues of $23.7M compares to the consensus of $24B."

Sue continued, "Motorola's other segments are starting to feel the impact of the macro as well. Magnified seasonality is expected from the Enterprise Mobility segment and Home & Networks for the first half. Some bright spots remain nonetheless such as federal projects. Additionally, cashflow from operations in the wireless infrastructure segments may be improving.

"Motorola is focused on cash preservation and will reduce its cost structure by $1.5B this year. Motorola's recently announced dividend cut may save $350M in 2009E (Q2-Q4). At the moment, the company has $7.9B in total cash. Motorola's headcount may decline to 6,000 by the end of the year from recent levels of 64,000."

In conclusion, Sue added, "From a valuation point of view, Motorola's stock is now trading at depressed levels of 0.2x our CY09 EV/Sales implying investors have associated a negative enterprise value to the mobile devices division. In addition to revamped products, broader services offerings which may provider consumer stickiness may be required at Motorola."

Sincerely,

BradReese.Com Cisco Refurbished
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