As Motorola, Inc. (NYSE: MOT) continues sliding into irrelevance in the mobile phone industry, it could slip to number four in the global cellphone rankings. After Korean giant Samsung Electronics handily beat Motorola in 2007 for the number two spot, and has held it ever since, Korean company LG is poised to overtake the third spot from the American cellphone icon later this year.
LG has come on strong in recent years, with hits like the LG Chocolate, a phone that has sold 18 million units since its debut a few years ago. LG also has a huge fan in the U.S. in the form of No. 2 cellular carrier Verizon Wireless, a joint venture of Verizon Communications, Inc. (NYSE: VZ) and Vodafone (NYSE: VOD). So, the soon-to-be top-three mobile phone lineup for global sales include a Finnish company and two South Korean companies. Motorola, poised for fourth place soon, would be followed by Sweden's Sony Ericsson.
Although Motorola has tumbled in recent years and is in the worse shape it could possibly be in, LG's rise hasn't been because of its competitor's stumbles. LG and Samsung both have made massive gains with high-end handsets, slick marketing and awesome designs in recent years, and have propelled themselves on their own merits over and above the competition.
All this without having a blockbuster like Motorola's RAZR, which sold 50 million units and still sells on store shelves today. As Motorola knew back in 2005, but seems to have forgotten today, design is where it's at and LG and Samsung both have it right now. As a result, Motorola seems to continue sliding down the pole of handset makers that just can't seem to compete any longer like they once did. I doubt newer CEO Greg Brown can fix that, but he may not have to.
MOST NOTEWORTHY: Visa, Cardionet and Motorola were today's noteworthy initiations:
RBC initiated Visa Inc (NYSE: V) with an Outperform based on margin expansion opportunities, the secular growth story towards electronic payments, lack of credit risk, and international opportunities. Piper started Visa with a Neutral rating. While the firm believes that Visa should generate long-term earnings growth and free cash flow, the firm thinks that Visa's valuation has increased the risk that strong earnings growth may not meet investors' expectations. However, the firm believes that Visa can still post strong results despite the U.S. consumer slowdown. Goldman initiated Visa with a Buy rating and $90 target and Morgan Stanley started shares with an Equal Weight rating and $75 target.
Citigroup rated Cardionet Inc (NASDAQ: BEAT) a Buy, citing favorable arrhythmia monitoring trends. The firm has a $26 target on Cardionet.
Motorola Inc (NYSE: MOT) was assumed with an Equal Weight rating and $75 target at Morgan Stanley on valuation.
MOST NOTEWORTHY: Motorola, Williams-Sonoma and Synchronoss were today's noteworthy downgrades:
Thomas Weisel downgraded Motorola Inc (NYSE: MOT) to Market Weight from Overweight based on the general uncertainty in the company's core markets and the likelihood that the spin off may not occur for several quarters.
Piper believes Williams-Sonoma Inc (NYSE: WSM) faces a challenging environment, and their checks reveal weakness at Pottery Barn. Shares were cut to Neutral from Buy.
ThinkPanmure downgraded Synchronoss Technologies Inc (NASDAQ: SNCR) to Accumulate from Buy. The firm expects a strong Q1 report but expects shares to sell-off following the Q1 conference call due to modest guidance and the lack of a major customer win announcement.
Motorola Inc. (NYSE: MOT) seems to be in the midst of a crisis, even as it prepares to split itself into two companies to give shareholders more visibility into just how bad one part of its business can be while the other piece can be, well, not so bad. Of course, I'm talking about the wireless giant's cellphone division, which is still in the top three worldwide in terms of sales. It's sinking faster than a rock, though. How did this come to pass?
After reading a missive by a former Motorola employee, Numair Faraz, who worked closely with the late Geoffrey Frost -- Motorola's former Chief Marketing Officer and father of the RAZR handset -- one has to wonder about a few things. For example, just what kind of incompetence has brewed in the corner office for the last three years? From reading Faraz's words, both former CEO Ed Zander is pitched as a complete idiot and slave driver who literally worked Frost to death and current CEO Greg Brown is pitched as a technological moron who can't even use email (his secretary prints off messages to read to him later). Are these truths? They sure could be.
Zander, who was highly regarded when he came back in 2004 to take over for CEO (and grandson of company founder) Chris Galvin, seemed to have everything going for him. Looking back, nothing ever went right for Zander. The RAZR that gave Motorola its two-year recognition was in the works before he arrived. What did Zander -- a former president of Sun Microsystems (NASDAQ: JAVA) -- do during his tenure with Motorola?
Swipe big chunks of compensation while churning out middling performance, according to many on Wall Street and Faraz as well. Maybe Galvin was not such a bad CEO after all, right? When Faraz said in 2003 that "Motorola's biggest problem is that Samsung kicks ass," he wasn't kidding -- and that's precisely what happened. Seems to be another example of very sub-par performance being rewarded with a golden parachute, while shareholders get shafted once again. Motorola stood at under $10 a share early today.
Last night, handset maker Motorola Inc. (NYSE: MOT) announced that it would be slashing another 2,600 jobs as the company continues to battle lower sales. The current job cuts represent approximately 4% of its total job force as of the end of 2007 of 66,000 employees.
It wasn't that long ago that Motorola was a major force in the world of mobile phones, but over the past two years the company has definitely fallen from grace among consumers. Two years ago the company was the world's second largest handset maker, but that status is no more, and the company is currently sitting in the fourth spot overall.
Analysts have blamed the company's drop due to lack of innovation, and some have gone so far as to predict that the company's handset business is doomed if Motorola can not pick up the pace and start to pump out new and fresh ideas for consumers to gobble up.
MOST NOTEWORTHY: Motorola, California Pizza, and Seagate were today's noteworthy downgrades:
Banc of America downgraded shares of Motorola (NYSE: MOT) to Neutral from Buy, despite believing the split into two businesses could ultimately unlock value, as they see few catalysts over the next year to lift shares. Banc of America also sees risk to Q1 earnings and lowered their target to $11 from $15.
Friedman Billings lowered California Pizza Kitchen (NASDAQ: CPKI) to Market Perform from Outperform citing sluggish trends in its core markets.
Seagate (NYSE: STX) was cut to Neutral from Outperform at Baird, citing weakening industry conditions throughout the month of March.
OTHER DOWNGRADES:
Goldman lowered the Communications Tech sector to Neutral from Attractive, and also downgraded Juniper Networks (NASDAQ: JNPR) and Starent Networks (NASDAQ: STAR) to Neutral from Buy, and Aruba Networks (NASDAQ: ARUN) to Sell from Neutral.
"Well, it's finally happened; under mounting internal and external pressure, Motorola (NYSE: MOT) has spun off its handset business," says technology stock expert Gregg Early.
This move, he notes, developed after Carl Icahn came in, picked up about 6% of the company, and wanted to shake things up. Here's Gregg's update from his industry-leading The Real Nanontech Investor.
"Motorola's handset division has been lost in the desert since the successful launch of the Razr a couple years ago. Since then, it's lost market share and has been less than imaginative in developing new mobile handsets. This kind of product pipeline strangulation isn't unusual at Moto.
"In the 1990s, the company almost went under because it couldn't quite figure out how to exploit all the great work it was doing in its labs. Getting products to market seems to escape this company.
"It looked like mobile phones were a sector where Moto could make big inroads, and the 'lab to fab' pipeline was working very well-for a few years. Now the No. 2 mobile phone maker is No. 3, having lost its spot to relative newcomer Samsung. And even No. 3 isn't secure if something doesn't happen quickly.
"This has been one of activist investor Carl Icahn's claims regarding the company. Moto is sitting on piles of cash; it has a world-class R&D program, and apparently no one who wanted to do anything bold or even businesslike with either.
Motorola Inc. (NYSE: MOT) shares soared at the open today, but are now trading only slightly higher after the company announced it plans to split itself into two publicly traded companies.
Under the plan, MOT's handset business will become its own entity separate from the company's home and networks business. The move comes after months of pressure from billionaire investor Carl Icahn, who thinks separating the handset business from other operations could help the company strengthen its mobile phone brand and bottom line. Pending regulatory approval, the company will be split in 2009. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MOT.
After hitting a one-year high of $19.68 in October, the stock hit a one-year low of $8.98 last week. MOT opened this morning at $10.30. So far today the stock has hit a low of $9.82 and a high of $10.35. As of 10:00, MOT is trading at $9.81, up just $0.05 (0.5%), indicating that investors aren't going crazy about this announcement. The chart for MOT looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
Motorola (NYSE: MOT) announced it has commenced a process to create two independent, publicly-traded companies, Mobile Devices and Broadband & Mobility Solutions.
MOT is recently trading at $10.33 in pre-open trading, above its close of $9.76.
MOT overall option implied volatility of 50 is above its 26-week average of 38 according to Track Data, suggesting larger movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
The Wall Street Journal reported that private loans under the Federal Family Education Loan, or FEEL, program have begun to give way to the federal direct loan program, as private lenders run into subsidy cuts and problems raising capital. To date about 60 colleges and universities have made the switch.
Carl Icahn, a 6.3% Motorola Inc (NYSE: MOT) shareholder, has sued the company to get board of director documents, turning away offers of two board seats, the Wall Street Journal reported. Icahn wants information about the company's unprofitable handset business.
According to the Business Review, New York State Senator Charles Schumer is planning to 'reveal details' of a conversation he had with the CEO of Advanced Micro Devices Inc (NYSE: AMD) on March 21 about the company's plans to build a $3.2B computer chip plant in Saratoga County.
Billionaire activist investor Carl Icahn says he is suing Motorola (NYSE: MOT) to compel the company to hand over documents related to its mobile device business. He is also, not surprisingly, urging investors to support his slate of nominees for the company's board of directors.
In a letter to shareholders filed with the SEC Icahn wrote that "As we all are painfully aware, over the past 18 months, the market value of Motorola has dropped by over $37 billion. More than $17 per share of Stockholder capital has vanished under the "guidance" and "leadership" of the current Board ... "
To correct the problems at Motorola, Icahn said that two things were necessary: spinning off the mobile device business and giving shareholders a "strong and capable voice in the boardroom." He also included a detailed list of "Empty Promises: Motorola's Record of Failed Leadership." If you're interested in Motorola at all, you absolutely must read this letter.
Icahn's battle for control of the company's board and removal of CEO Ed Zander failed last year, although Zander was subsequently pushed out after more bad results. Now Icahn is raising questions about recently-installed CEO Greg Brown: And what "qualified" Brown to be the CEO? He certainly - as far as I can ascertain - has no in-depth experience or knowledge concerning the Mobile Devices business, which was and is by far the major problem for Motorola. Hopefully, our litigation with Motorola will soon reveal just how hard our "blue-ribbon board" tried to find an alternative to the "qualified" Mr. Brown.
Classic Icahn. Priceless. Icahn controls 6.4% of the company's stock and, given the continued failure of the company to generate value, his second battle for control of Motorola should draw more support.
Normally when a company keeps replacing senior management it is a sign that upcoming quarters are not likely to be stellar. Over the weekend Motorola (NYSE: MOT) pushed out some key people.
The company is bringing in a private equity executive to be treasurer. It is also replacing the head of its Europe, Middle East and Africa cell phone operations. According toThe Wall Street Journal the company said "the leadership changes are part of an overall plan to swiftly transform the senior executive team."
Motorola has been trying, unsuccessfully, to sell its handset division, probably to a rival like Samsung. It now appears that the firm will have to work its way out of trouble. That means that executives in areas where the company is doing poorly could all be out in the next several months.
Motorola's share of the global handset market has dropped from 22% two years ago to about 12%. It does well in North America, but sales overseas have been weak as the popularity of its Razr phone has dropped.
Motorola could lose several billion more dollars in handsets and the turnaround could take a year or more, if it ever happens. In the meantime, stockholders are dead.
Douglas A. McIntyre is an editor at 247wallst.com.
Texas Instruments (NYSE: TXN) revised its quarterly outlook down during an update of its business yesterday. It pointed to its 3G chip business as a reason for the disappointment and indicated that one of its larger customers had cut demand. TI's largest 3G chip customer is Nokia (NYSE: NOK).
Shares in Nokia fell 3.2% in early trading on the news.
While the news may be bad for Nokia, it is worse for Motorola (NYSE: MOT), which was not generally mentioned as part of the TI news. Nokia has a strong balance sheet, is highly profitable, and has 40% of the handset market worldwide. In other words, it can weather a slowdown.
Motorola's share of the global cellphone business is now about 12%, down from 22% two years ago. Its stock trades near a 52-week low, at $8.54. Its cell operation has been for sale for over a month, and there appear to be no likely buyers, perhaps because of its huge losses.
If Nokia is getting a cold, Motorola is getting pneumonia.
Douglas A. McIntyre is an editor at 247wallst.com.
Motorola, Inc. (NYSE: MOT) CEO Greg Brown just can't make up his mind on trying to find a leader for the telecom company's troubled wireless handset division. First, he anointed himself as leader of that division, which needs a swift kick in the pants to return to profitability and deliver some knockout cellphones customers will lust after. Maybe he bit off more than he could chew.
At least Brown says that the company is "committed" to the handset division, after rumors of a company breakup swirled heavily in the air. Well, that may be true, as Brown is reportedly looking for a new executive to run the handset division. In fact, he stated that 80% of his time these days is being spent looking for that person as he aired in a few conversations at a recent Morgan Stanly Technology Conference.
Motorola's Brown said that he's looking outside the company as well for the new executive to lead the handset division of Motorola -- someone who will be tasked with leading the most public face of the company "on a product-led recovery." That's an understatement -- this executive will need design and marketing finesse in addition to strong logistics and P&L experience at the very least to get some kick back into Motorola's cellphone existence while making a consistent profit. That's a tall order considering the state Motorola's handset division is in at the moment.
As Motorola, Inc. (NYSE: MOT) continues sliding into irrelevance in the mobile phone industry, it could slip to number four in the global cellphone rankings. After Korean giant Samsung Electronics handily beat Motorola in 2007 for the number two spot, and has held it ever since, Korean company LG is poised to overtake the third spot from the American cellphone icon later this year..gif){kind=logo}
Last night, handset maker .gif){kind=logo}
"Well, it's finally happened; under mounting internal and external pressure, 
Motorola
Oil hits record $127.43 on supply concerns, raised Goldman forecast
Icahn's 'shock and awe' on Yahoo -- a gutsy play
Housing starts surprisingly rise in April on apartment construction
