Tuesday, February 27, 2007

Can Carl Icahn Successfully Predict Motorola's Future?


In June 2006, Business 2.0 Magazine assembled a list of 50 prominent people, identified not on the basis of pecuniary notability, but on their ability to change the world we live in today—“ by inventing important new technologies, exploiting emerging opportunities, or throwing their weight around in ways that are sure to make everyone else take notice.”

In assembling this list, the editorial staff emphasized one key question: What have you done for us lately? They also considered its important corollary:
What will you do for us tomorrow?

Ranked high on this list was
Ed Zander, CEO, Motorola, Inc. (MOT-$19.25): “In the span of less than three years, Zander has pulled off the most dramatic tech turnaround since Steve Jobs revived Apple. Motorola was moribund and starved for a consumer hit when the former Sun Microsystems exec took over as CEO in 2004; Zander put the ultrathin Razr phone on the R&D fast track…. with the slimmed-down handsets leading the charge, Motorola looks stronger than ever.”

In fiscal year 2006, Motorola had few new products that cell phone companies wanted to offer; ergo, it artificially propped sales demand for tens of millions of Razrs and their offshoots, such as the KRZR, by slashing prices. One month ago, the Company disclosed its weakest quarterly results since 2004.

"It is very difficult to make an accurate prediction, especially about the future." – Niels Bohr, Danish physicist (1885 - 1962).

On February 21, 2007, the Company said the
1H:07 would be “rocky,” and that the earliest the cell-phone maker would return to double-digit operating margins would be in the third quarter of FY 2007.

Motorola's stock has tumbled about 26% from a 52-week high in October, and hit a 52-week low of $17.90 on January 12.

As Apple, Inc. (AAPL-$88.65) gears up to attack the $250-plus phone(s) market segment with its
iPhone, due out in June, financier Carl Icahn—who beneficially owns, in the aggregate, 33.53 million shares, or about 1.39% of the Company—and other Motorola shareholder’s are probably asking: “Ed Zander, what will you do for us tomorrow?”

History is awash with bold predictions gone awry.

"There is no reason anyone would want a computer in their home." -- Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977.

The editors at Business 2.0 Magazine might want to rethink their top fifty list.

Editor David J Phillips does not hold financial interests in any of the companies mentioned in this posting. The 10Q Detective has a Full Disclosure policy.

1 comment:

The Sound said...

Still long MOT, and selling premium against the underlying. That's a funny reminder of Ken Olsen - I certainly didn't want a PDP 11/24 in my home in 1982.