Reducing Motorola Price Target

Motorola, Inc. (MOT), a leading manufacturer of mobile handsets, network infrastructure and cable products, continues to be challenged with its floundering mobile handset business and significant market share loss of units sold on a worldwide basis.

Motorola's cellular phone market share declined to under 10% at the end of the first quarter 2008 and its newly launched 3G handset received limited levels of consumer interest. According to our assessment, the company's business growth prospects may take longer to proliferate than previously expected.

Recent recessionary conditions and the possibility of higher input costs may further impede any form of financial improvement. The management declared that it may spin-off its mobile devices division as a separate entity by early next year. We maintain our Hold recommendation with a reduced valuation target due to lack of any potential turnaround indicators.

In order to remain competitive, Motorola introduced a variety of 3G smart-phones and also enhanced its handset portfolio through a series of newly launched feature and fashion upgrades. Motorola has been proactive with identifying outside technology to complement its core offerings. Beyond Motorola's wireless business acquisitions, the company is well positioned in digital media transport with new technology.

Motorola is currently operating in a net loss position and, therefore, it is difficult to value the stock on P/E multiple basis. However, evaluating the company with P/S and EV/S metrics, the stock is trading well below its peer group average. We believe this valuation discount reflect the company's disappointing first quarter performance and the lack of meaningful growth catalysts over the near-term. We set a reduced six-month target price of $9 based on a Price/Sales ratio of 0.63x to our fiscal year 2008 revenue estimate.

Growth Slowing for Infosys

We continue to rate Infosys Technologies, Ltd. (INFY) a Hold. The company reported higher than expected revenues and earnings for 1Q:FY09. It continues to strengthen strategic alliances and reorganize businesses in order to counter the effects of business cycles.

The company reported lower operating margins in the first quarter due to a high attrition rate, while benefiting from a 5.6% depreciation of the rupee. These effects were offset by lower utilization rates and effects of salary increase and visa costs. We are projecting a lower 2009 revenue growth rate of 21.0% in dollar terms while wage increase, currency and attrition remain our major concerns.

One high-risk area for Infosys remains its over-exposure to the slowing U.S. market, which accounts for more than 60% of revenues and therefore it is more prone to adverse effects of currency.