On August 15, an article was published in the Silicon Alley
Insider titled
“Motorola's
Funeral Canceled: On Slow Road To Recovery, Says Citi (MOT)”. Motorola will
be spinning off its mobile division, bringing in new management and a launching
over 30 new products in the near future. Since beating the street on July 31 by
5 cents in EPS, the stock price has rallied over 40%. Many analysts remain
impressed as this company seems to be getting the act together in its
turnaround strategies, at least for one quarter anyway. Carl Icahn even boosted
his stake by around 30 Million shares.
Once having commanded more than one-fifth of the global
handset market, Motorola ended recent quarters with less than 10% market share.
In addition, shelf-space at major carriers are declining rapidly. It seems like
Motorola is on track to become a lot more like Nokia, who does not have one
great product, but a portfolio of good ones. Hence, that’s why the company is
planning to introduce so many new phones. Yet although this strategy has worked
for many companies in the past, Motorola has not really developed many phones that
people actually want to buy. Case in point, the ROKR partnership between Apple
and Motorola didn’t go exactly as planned. What happened next with Apple is
history.
Another problem with focusing on developing so many products
is that production and development costs will increase substantially; this is
particularly concerning with mobile division on the verge of being separated,
which means any synergies between the two companies in R&D, production,
sales, servicing, marketing will be lost. Perhaps what Motorola needs to focus
on is not on a slew of products, but one product that will define the next generation,
like RIMM and AAPL.
Motorola has many unanswered concerns that need to be
resolved in order to get my vote:
1. What’s the new co-chief’s strategy?
2. Although net positive, mobile devices had
operating loss of $346 Million
3. Cost savings of $1 Billion in 2008 is great for
earnings short-term, but certainly not sustainable long-term
Perhaps Motorola will get it right this time, but before
seeing more consistent quarters and a more polished corporate strategy, there
are simply better options to invest in the Telecom space – NOK, AAPL, RIMM, LG.
Disclosure - None
