Motorola Inc. (NYSE: MOT) just can't seem to find a sliver of good news to hang on to these days. The cellphone manufacturer based outside of Chicago saw its shares hit a five-year low this week as the outlook for its cellphone division continues to worsen. The company is in the midst of preparing to spin off the division to rid itself of that baggage. It's a sad state when that "baggage" is what defines Motorola.
Motorola contract manufacturer FoxConn had some cautious words to say this week as well, which probably helped propel Motorola's shares downward to $7.61, a level not seen since May 2003. After losing $194 million in the first quarter alone, it's just bewildering to see how such a great company completely lost its way, financially speaking.
It's not getting any better. The company's product launches have been described as a "half-baked mess" and it can't seem to find a knack for the cellphone handset design that it made so famous years ago with the RAZR. Motorola certainly isn't a one-hit wonder, but in the brutal cellphone market you need a hit every year to stay at the top of your game. Korean giant Samsung Electronics passed Motorola by in 2007 to become the world's second-largest cellphone manufacturer by having a whole host of cellphone designs available to almost every wireless carrier in the world. That's just for starters, but for Motorola, it seems to be an impossible goal at the moment.
Now that Verizon Wireless has agreed to purchase privately held Alltel from its private equity owners (giving them a small profit and an out), what else is on tap for the soon-to-be largest wireless carrier in the U.S.? Verizon Wireless is chomping at the bit to overtake AT&T Inc. (NYSE: T) as the largest wireless carrier in the U.S., and its acquisition of Alltel will give it an 8 million+ wireless subscriber advantage over Ma Bell.
Although Alltel's buyout by Verizon was expected last year, it's now going to finally happen. Both companies use the same technical wireless standard, so this will be an easy merger. There will be no issues like when Sprint merged with Nextel in 2005 and the two incompatible networks caused an epic failure of those two companies to merge into one. Speaking of Sprint Nextel Corp. (NYSE: S), where does it play into the Verizon-Alltel landscape? Does its WiMAX plans now become derailed with the Verizon announcement, adding more insult to injury about the state of the company?
If anything, look for Verizon to take a strong look at buying Sprint Nextel shortly after its deal with Alltel closes. There would be way more regulatory scrutiny than the Alltel deal (overlapping markets, etc.), but a one-two knockout punch like this would make Verizon Wireless the pre-eminent wireless carrier in the U.S. for a long time. AT&T would have no choice but to plead with Deutsche Telekom to buy T-Mobile USA, the nation's fourth-largest wireless carrier, and one who also shares the same type of technical network as AT&T. Perhaps 2009 will see some of the neatest consolidation in the wireless world yet.
Motorola (NYSE: MOT) is getting close to picking a CEO for its handset division. The operation is going to be spun-out next year. Its worldwide share of the cell phone business has fallen from 22% to about 10% over the last two years.
The CEO search may be one of those odd situations where a chimpanzee may be as good as a man.
According toThe Wall Street Journal, "Chief Executive Greg Brown is desperate to find a manager to turn around Motorola's mobile-devices division, which has lost $1.6 billion since January 2007, when its hit Razr phone ran out of steam." But, can new management do what two previous generations of managers at Motorola could not do? The company has been effectively flanked by the world's largest handset company, Nokia (NYSE: NOK), along with Samsung and Sony Ericsson. Getting back any market share may be hard for Motorola.
The spin-off also raises the issue of how the new unit will find capital. It will need at least $2 billion to $3 billion in cash. For a failing company, that may be hard to come by.
Motorola now trades at $9. Its enterprise and home electronics divisions could be worth as much as its $20 billion market cap. That leaves the handset unit with a value of zero.
Shares of Sprint Nextel Corp. (NYSE: S) are rising on a Wall Street Journal (subscription required) report that Deutsche Telekom AG (NYSE: DT) is poised to make a bid for the wireless telecommunication company. If the report is accurate, Sprint's long suffering shareholders should do as the Steve Miller Band song suggests "take the money and run" because the deal may not happen.
For Sprint, though, this may be its only hope. Sprint shares have slumped almost 40% this year as the Overland Park Kansas-based company tried in vain to gain marketshare against larger rivals including Verizon and AT&T Inc. (NYSE: T). The commercials starring the company's affable CEO Daniel Hesse haven't helped much either. Remember when Hesse was named CEO last December, board member Irvine O. Hockaday Jr. remarked that Hesse "has the board's full support to take decisive actions necessary to improve our performance."
But as Bloomberg News points out, analysts argue that integrating the Deutsche Telekom and Sprint Nextel networks wouldn't be easy. Moreover, the U.S. Department of Homeland Security may not look kindly on a foreign company taking over a U.S. telecom provider for national security reasons, the news service notes.
Even so, the arguments for the merger are so compelling that it might be worth the risk.
AT&T Inc. (NYSE: T) today posted strong first quarter results thanks to the continuing popularity of the iPhone and its ability to squeeze more savings from the BellSouth merger.
Net income rose to $3.46 billion, or 57 cents a share, from $2.85 billion, or 45 cents. Sales climbed 6% to $30.7 billion. On an adjusted basis, profit was 74 cents. The results matched the estimates of analysts surveyed by Thomson Financial, which in this market is good news. Shares of the telecommunications company were trading up in early morning market action.
"Revenue growth continues to ramp, we have good momentum across key growth areas, major cost initiatives are on track, and our operational results reinforce the confidence we have in our outlook," said Chief Executive Randall Stephenson in the earnings release.
Among the highlights:
Total wireless revenue increased 18.3% year-over-year to $11.8 billion. Wireless service revenue, which excludes handset and accessory sales, grew 17.1% to $10.6 billion. Growth was driven by strong subscriber gains and continued improvement in ARPU (average monthly revenues per subscriber).
Wireless data revenues grew 57.3% to $2.3 billion, reflecting surging demand for Internet access, e-mail, messaging, data access and media bundles.
The first quarter net gain in wireless subscribers totaled 1.3 million. AT&T ended the quarter with 71.4 million subscribers.
AT&T's broadband revenue grew 13.2% in the first quarter to $1.4 billion.
Total video connections, which include AT&T U-verse service and bundled satellite television service, increased by 264,000 to 2.6 million.
The mean price target of Wall Street analysts is $44.39, well above where it currently trades. Perhaps investors are expecting the next earnings report to show signs of a slowdown.
AT&T said it will cut about 4,600 jobs, or roughly 1.5% of its work force, as it integrates several businesses and streamlines operations, The Associated Press reported Friday.
AT&T (NYSE: T) also said it plans to take a $374 million first quarter, pre-tax charge in connection with the job cuts, The AP reported. The company added that, longer-term, the jobs cuts will be offset by staff additions as it invests in growth areas. The company had about 309,000 employees as of December 2007.
Shares of AT&T rose 31 cents to $37.88 in mid-day Friday trading on the news.
AT&T, which posted Q4 2007 EPS of 71 cents, in-line with the Reuters Q4 2007 consensus estimate, has made several acquisitions in recent years, including SBC Communications and BellSouth, as part of its business model revision for the digital age.
After hitting a one-year high of $747.24 in November, the stock hit a one-year low of $412.11 in March. GOOG opened this morning at $457.01. So far today the stock has hit a low of $456.20 and a high of $471.99. As of 12:45, GOOG is trading at $470.01, up $14.89 (3.2%). The chart for GOOG looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
Readers of this space know that one of the preferred plays is a utility company with a demonstrated business model, solid balance sheet, ample cash, decent dividend, and with an extra revenue stream / business that could provide additional growth. Verizon is one such company.
Verizon is not your typical, former AT&T (NYSE: T) unit. Verizon Communications (NYSE: VZ) is a modern, diverse telecom provider for the early digital age.
Verizon has three impressive divisions: landline, wireless, and business services. And the numbers speak for themselves: the landline unit has an astounding 41.4 million subscribers in 28 states, Verizon Wireless is the U.S.'s second largest wireless provider, and business services is making inroads on medium/large enterprise customers and government agencies.
Further, the company's fiber optic broadband/video service, FiOS emerged as a competitor to comparable cable broadband/video services: look for VZ to continue to grab market share in key markets, as the service is rolled-out in the years ahead. The Reuters F2008/F2009 EPS consensus estimates for VZ are $2.65/$2.92.
Those who think Google Inc. (NASDAQ: GOOG) is happy being the world's most dominant search engine haven't been reading their tea leaves on the wall (or some mixed metaphor like that).
Google recently exited the FCC's 700 Mhz spectrum auction without winning anything but gaining much. The tech giant persuaded the FCC to open up the wireless networks and won big without having to spend almost $5 billion on licenses. I never thought Google wanted to build out a wireless network, and chooses instead to deliver ads and applications to other operators.
I was interested to read yesterday about Google's further lean on the FCC to open up soon-to-be-unused broadcast spectrum as the U.S. converts to digital TV. Google wants access to these "white spaces" to begin using them to manage a nationwide WiFi network -- free, unlicensed and able to reach much farther than WiFi can today.
When the Federal Communications Commission releases the results from its $19 billion auction of new wireless spectrum, all eyes will looking for one name: Google Inc. (NASDAQ: GOOG).
The search giant is eager to expand into the mobile world. Odds are that the company won't outbid Verizon Wireless or AT&T Inc. (NYSE: T) for the "C" block of new spectrum that attracted a $4.74 billion bid. BusinessWeek has reported that Google probably withdrew from the bidding. But as The New York Timesnotes, Google scored a pretty significant victory already.
"While Google was not expected to post a winning bid, it has already achieved an important victory by influencing the auction rules," the paper said. "The commission forced the major telephone companies to open their wireless networks to a broader array of telephone equipment and Internet applications."
In other words, people can download whatever application they want to their mobile phones, which is exactly what Google wants to happen. Fortune recently noted that open standards are a central feature of Google's Android mobile platform. Speculation abounds about Google's interest in the mobile area, though the much anticipated Gphone has yet to materialize.
Wireless companies like Sprint (NYSE: S) and Virgin Mobile (NYSE: VM) are ailing. Yet, at the same time, there are several new entrants into the space, such as Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG).
So, what's going on? Well, I had a chance to interview Frank Dickson, who is a wireless expert and the Chief Research Officer at MultiMedia Intelligence.
What's your take on Sprint? Is the industry undergoing some disruptive changes?
We are seeing some disruptive changes on a macro scale. They are not the cause of Sprint's problems though. The problem with Sprint is self-inflicted, much of which finds its roots in the Nextel merger.
What we have seen of late is a huge movement towards cellular operators becoming bandwidth providers. Voice is quickly becoming a commodity application running over their networks. All the major carriers have announced all the voice minutes that you can eat for $99. Sprint one upped with a super buffet of voice, data, and messaging for $99. The constituencies that most hate the term "dumb pipe" are ironically the entities that are driving the bandwidth provision competition as differentiation based on service offering gives way to price competition.
Some investors / readers may not be aware that the Internet -- critical as it is today for commercial activities and the flow of information -- was not designed to handle the volume and complexity of today's web tasks. Moreover, the appearance of Internet bottlenecks and ensuing upgrades to broadband and, eventually, to hyperband, has created an impressive business opportunity for ADC Telecommunications.
ADC Telecommunications (Nasdaq: ADCT) is a global supplier of broadband network equipment, software, and systems integration services that enable communications service providers to deliver highspeed Internet, data, video, and voice services.
In F2008 analysts expect strong fiber connectivity sales, including substantial work from telecommunications giant AT&T Inc. (NYSE: T). Further, ADCT's product mix should improve, with high top-line connectivity products offsetting some sector-wide pricing pressure.
Sprint's shares plunged more than 15% Friday morning after the company said it will cut about 4,000 jobs and close 125 stores to cut costs to improve its financial performance, the company announced Friday in a statement. Sprint's shares sank $2.06 to $9.51 in early trading Friday.
Sprint (NYSE: S), the No. 3 wireless carrier, said the action would lower labor costs by about $700-$800 million annually. Sprint said the jobs cuts would occur nationally, and would include managers.
The action comes after the company announced that it lost an additional 683,000 customers last quarter, which brought 2007 customer losses to 1.2 million.
No 3. carrier Sprint has been stung by customer departures, as customers have been lured to competitors AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ), which feature more-popular phones/PDAs and better service. Moreover, although Sprint's call quality and network has improved in the past six months, Sprint has found it difficult to reverse the company's earlier reputation as one of the worst call networks in the mobile sector. In addition to Sprint's aforementioned attrition problem, analysts believe that reputation is holding down subscriber recruitment.
It's been a good week for Wi-Fi startup Meraki. First of all, the company raised a cool $20 million in venture capital. Investors included Sequoia Capital, DAG Venture and Northgate Capital.
What's more, Meraki says it will offer free high-speed wireless Net access throughout San Francisco. No doubt, the announcement is getting a lot of buzz.
But what does this really mean? I had a chance to interview Craig Settles, the author of Good Fight for Municipal Wireless. According to him:
"It is vitally important that people realize Meraki is NOT making this service available for free elsewhere. People have to pay for the hardware and individuals have to step up to provide DSL or some other high-speed landline access for some of these repeaters. Meraki is doing what EarthLink -- along with Google (NASDAQ: GOOG) -- should have done, that is, use the big, high-profile city as a marquee account, but sell the service to everyone else. Don't get sucked into the 'free' hype.
It was certainly an exciting year for wireless. Apple (NASDAQ: AAPL)'s iPhone was a game changer, there were some big announcements from Google (NASDAQ: GOOG), and even Nokia (NYSE: NOK) made an impressive comeback.
As for 2008, it's a good bet we'll continue to see some big headlines.
I interviewed Frank Dickson, who is the chief research officer at MultiMedia Intelligence. According to him:
The handset as a platform: The introduction of the iPhone was the first example of this. It did not create the trend, but it did add fuel to the fire. Google's Android and a rumored Java-based OS are elements of the developing trend. Essentially, we are seeing the rise of a new class of mobile devices that are applications centric with voice functionality. These devices are internet browsers, music players, text messengers, and e-mail devices. Yes, they still make voice calls, but they are clearly optimized for other uses. Operators such as Verizon Wireless (NYSE: VZ) are seeing the coming explosion of this product class and have embraced it by opening their networks to these devices.
Motorola Inc. (NYSE: MOT) just can't seem to find a sliver of good news to hang on to these days. The cellphone manufacturer based outside of Chicago saw its shares hit a five-year low this week as the outlook for its cellphone division continues to worsen. The company is in the midst of preparing to spin off the division to rid itself of that baggage. It's a sad state when that "baggage" is what defines Motorola. 
Now that Verizon Wireless has agreed to purchase privately held Alltel from its private equity owners (giving them a small profit and an out), what else is on tap for the soon-to-be largest wireless carrier in the U.S.? Verizon Wireless is chomping at the bit to overtake 
Motorola
Shares of 
AT&T Inc.
When the Federal Communications Commission releases the results from its $19 billion auction of new wireless spectrum, all eyes will looking for one name: 
Wireless companies like 
Sprint's shares plunged more than 15% Friday morning after the company said it will cut about 4,000 jobs and close 125 stores to cut costs to improve its financial performance, the company announced Friday i
It was certainly an exciting year for wireless. 
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