Tuesday, May 05, 2009

Motorola's (MOT) Problems

Motorola's (MOT) numbers this morning weren't pretty. For once in a long time, it wasn't only the Mobile Devices division that did in the quarter but the home networks and enterprise ones joined in, with profits in those units down 25% and 37% respectively from a year earlier.
Like a lot of companies this earnings season, MOT missed on the top line but beat on the bottom.
Mobile devices will not be spun-off any time soon, according to co-CEO Sanjay Jha.
Investors didn't like what they heard, and shares are off 7% this afternoon.

The company does have a number of positive things going for it. We're likely approaching the trough for worldwide sales of mobile devices. As people shun traditional PCs in favor of lighter netbooks and mobile computing devices, this market is set to rebound. RIMM's and Apple's (AAPL) recent earnings demonstrate this thesis is working. It's also comforting to know that, as bad as things have been for MOT, it still sold more phones than RIMM and AAPL did last quarter combined.

The bad news is that MOT is still led by an awkward co-CEO structure that was created when splitting the company seemed imminent. Greg Brown was an uninspiring choice to replace Ed Zander from the start. This company's board is still pretty much the one that oversaw the company perform hari-kari on itself. It's also very quickly destroyed its brand identity it had recaptured thanks to the RAZR.

It's possible the roll-out of the Google (GOOG) Android phones later in the year will create some buzz to jumpstart flagging mobile devices sales (down 45% from a year ago), but those are quite a few eggs in one basket. I would stay away from MOT.

Position: None.

Originally published in RealMoney.com on 4/30/2009 3:11 PM EDT

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