Motorola, Inc.
Motorola, Inc. (MOT) provides wireless and networking equipment for cable and telecom service providers. The company, which is considered to be in the communications equipment industry, makes mobile phones, Bluetooth devices, cellular infrastructure systems, and many other products made to enhance mobile communication.
As with any company in this recession that sells relatively expensive products to end-consumers, Motorola has been hurt by slower sales. But, Motorola hasn’t just been hurt - it has been crushed. The company has been losing market share to its competitors, it has been losing more money than it has been making for over a year, and its stock price has been absolutely massacred as a result. The stock price is currently at $4.48, down around 70% from its 52-week high of $15.25.
Motorola’s global handset market share used to be 22% in 2006. That means that Motorola made 22% of all cell phones used in the world in 2006. In 2007 and 2008, it is estimated that Motorola’s global handset market share fell to 13% and 8.5%, respectively. That is the exact opposite of growth, and it spells trouble for anyone looking for a company that has future potential. What can be attributed to Motorola’s steep decline in market share? Think about all of the amazing smart phones that have come to the market in the past few years. Nokia has made very nice smart phones that are extremely popular in Asia and Europe. The Blackberry Curve, Bold, and Storm have also been extremely popular and look to become even more prevalent as the rest of the world tries them out. And last but not least, Apple’s iphone has been a monster that will continue to grow at a very fast pace across the globe.
Now think about all of the great phones Motorola has come out with recently. Hmmmm. I can’t even think of one… and that is exactly the problem! Motorola has not shown many signs of life in terms of keeping up with its competitors, and if the company does not come up with a desirable phone soon, their current 8.5% market share could plummet even further.
Not only has Motorola been losing market share, but it has also been operating in the red, meaning that the company has been losing money instead of making money. Ever since the first quarter of 2007, Motorola’s quarterly earnings per share have been either negative or barely positive. It is getting worse too, as the company’s EPS for the 3rd quarter of 2008 was -$0.18, and its net income dropped 761.7% from one year ago to -$397 million.
The company is clearly shrinking at a scary rate, and it makes you wonder what is keeping it from going bankrupt. The factor that is keeping Motorola afloat is the company’s balance sheet, as it is sitting on a load of cash and very little debt. At the rate that Motorola is spending money and with the company’s debt obligations, it can last safely into 2012.
So, while the company probably will not go bankrupt, I really do not see any reasons to expect much growth. It is getting crushed by its competitors, and Apple, Rimm (blackberry makers), and Nokia, are making great phones and are expending at blazing speeds. If you have a hunch that Motorola will invent a great phone in the near future, or you have some reason to believe that it has some trick up its sleeve, go ahead and do some more research to see if you should invest in it.
Personally, I do not see any factors that will impact the company’s positive growth any time in the near future, and I think that its stock price will hover in the low-to-mid single digits for a while. This company bores me, and it will bore you if you have it in your stock portfolio.
Niki Pezeshki
College Trillionaire
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