The once proud Schaumburg, Illinois-based Motorola (NYSE: MOT) has never fully recovered from the collapse of the technology sector in 2000. From its peak of over $57 in February 2000, MOT lost 75% of its market cap the next 12 months and surrendered another 50% over the following two years.The stock is currently trading at $3.90 after reaching a low for the last 52 weeks of $3. The stock traded at the high for the period in mid-November, reaching $12.59.
Motorola released a very disappointing fourth-quarter earnings report this week, reporting a loss of $1.7 billion for the period as compared to being profitable the fourth quarter of the previous year. After the release, Motorola suspended the payment of dividends to shareholders.
Simultaneously with the release, the company announced the sudden resignation of Paul Liska, the company's Chief Financial Officer, who joined the company only last year. Liska had as his forte the raising of capital. The company is probably better served with a CFO with financial management skills.
Particularly disappointing was the report of a 53% drop in the sale of handsets. The slight bit of positive news in the report was that gross margins and cash flow showed improvement, with gross margin increasing to 29.7% from 26.3% in the previous quarter.
Company Chief Executive Officer, Sanjay Jha, stated that the increased margin resulted from a shift in product mix toward higher margin network solutions and away from the sale of handsets.
In his comments following the release, Jha revealed that Motorola was investing its capital in the development of a Smartphone product to attract higher income users. The company is banking on the SmartPhone product to turn its fortunes around.
This move by Motorola may be its last best hope for returning to profitability. The market at this point appears skeptical.
In entering this market segment, Motorola is anchoring their venture on Google's (NASDAQ: GOOG) as yet untested Android operating system platform. Focusing on the mid-range price market, Motorola is a late entry into the Smartphone game.
Entering a line of business dominated at this point by Apple (NASDAQ: AAPL) and Research In Motion (NASDAQ: RIMM), Motorola has a tough time ahead. With a planned release of their product late this year, Motorola also trails Palm, which is expected to release their Pre SmartPhone late this year as well.
Favorable to Motorola's prospects in this area is a strong balance sheet, with a debt-to-equity ratio of 0.44. The outlook for MOT, however, remains grim at this point.
Jamie Dlugosch is a contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.
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