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Motorola in Pain. Dell to Rescue?

Posted on Friday, Feb 8th 2008

Motorola has had a new CEO since January 1, 2008. Zander is gone. Greg Brown is at the helm.
And now there is talk of breaking the company up into pieces, spinning off the mobile handset unit. Carl Icahn also continues to lobby for a position on the Motorola Board. On January 23, 2008, Motorola, Inc. (NYSE: MOT) reported Q4 and 2007 financial results and its stock price hit a 52-week low of $9.43. The results are dismal, but let’s take a quick look at them anyway.

For the full year 2007, revenue was $36.6 billion, down 15%, and net loss was $0.02 per share, including net loss of $0.05 per share from continuing operations and earnings of $0.03 per share from discontinued operations. Q4 revenue was $9.65, down 18% y-o-y and up 9% sequentially. Net earnings were $0.04 per share. During the quarter, it repurchased 33.7 million shares for $557 million. Earlier coverage on Motorola are available here and here.

Mobile Devices segment revenue was $4.8 billion, down 38% y-o-y and up 7% q-o-q on shipment of 40.9 million handsets. Operating loss was $388 million versus operating earnings of $341 million in Q4 2006. For 2007, revenue dipped 33% to $19.0 billion with operating loss of $1.2 billion (versus operating earnings of $2.7 billion in 2006). Q4 sales grew 12% y-o-y in North America and accounted for 80% of the sales. Outside of North America, sales went up 24% with strong demand in Europe and Latin America.

Home and Networks Mobility segment revenue increased 11% y-o-y and 14% q-o-q to $2.7 billion. During the quarter, it completed the sale of its embedded computing business to Emerson for $350 million. For 2007, revenue increased 9% to $10.0 billion. North America accounted for 63% of Q4 sales, EMEA 24%, Asia Pacific 8% and Latin America 5%.

Enterprise Mobility Solutions segment revenue was $2.1 billion, up 35% y-o-y and 9% q-o-q driven by the Symbol acquisition last year. For 2007, revenue increased 43% to $7.7 billion. It recently acquired majority stake in Vertex Standard. Regionally, Americas represented 60% Q4 sales, EMEA 30% and Asia-Pacific10%.

For Q1 2008, Motorola expects a loss from continuing operations in the range of $0.05 to $0.07 per share. Things have gone from bad to worse with iPhone coming into the picture and Motorola not having a good encore to the popular RAZR. Its stock price has fallen around 35% since the iPhone launch to around $11.4 and its market cap is around $26 billion.

Now, it is considering selling its handset business. This news sent shares up. Word is around that Dell, LG, and Samsung could be some possible takers. Dell needs a convergence device strategy badly, and Motorola would provide the launching pad for that. The business, however, would need to be turned around, and a steady stream of new hit products need to hit the market. The business of handsets is a “hits” business, like movies and toys.

Motorola, recently, seems to have forgotten the formula for churning out hits.

Chart for Motorola Inc. (MOT)

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