Motorola: Ringing Up Sales
After several humdrum years, things are looking up at Motorola, which is benefiting from strong demand for its mobile-phone lineup.
The Schaumburg, Ill., telecommunications giant is the second-largest manufacturer of mobile phones, which represent about half of sales. The company also makes infrastructure equipment for wireless and cable networks. Last year, sales jumped 18%, to $37 billion, while earnings increased 50%, to $4.7 billion. Fourth-quarter earnings soared 86%, to $1.2 billion, on strong demand for Motorola's latest line of mobile phones. These phones, which feature stylish design and fashionable colors, include the ultra slim Razr, as well as the clamshell Pebl model and a candy-bar design called Slvr.
Motorola (symbol MOT) invented the first portable cell phone more than 30 years ago. It dominated the cell-phone market for years, but lost the lead in the late 1990s as consumers took to smaller, lighter phones from overseas competitors such as Finland’s Nokia and Korea's Samsung.
The company has spent years playing catch-up, improving products, trimming costs, and cutting debt. In 2004, Motorola named Ed Zander, a former president of Sun Microsystems, as its new chief executive officer, and many analysts credit him with resurrecting the company. Motorola plans to introduce new wireless phone models this year, and will launch a subscription music service, called iRadio, that lets users download music to their cell phones for about $7 a month.
Nick Kaiser, who manages the Amana Growth fund, says Motorola’s strong balance sheet makes it a good fit for his fund. “Motorola has really improved its financial structure,” says Kaiser. “We’ve seen steady earnings growth over the last nine quarters and I think it will continue to grow at a reasonable rate.”
Hasan Imam of Thomas Weisel Partners says the strong product lineup should enable Motorola to boost market share, and he expects earnings to continue to grow as new products hit the shelves and the company continues to cut costs.
Motorola’s stock has more than tripled over the past three years, and is up 47% over the past year. At $22, it trades at 17 times the $1.31 per share that analysts, on average, expect Motorola to earn in 2006.