Motorola Wages Uphill Battle To Gain Share Against Apple, RIM

Tough fight on MOT's hands

The mobile phone industry is a highly competitive industry with players like Motorola, Apple, Research in Motion and Nokia each fighting for market share. We believe that Motorola’s declining market share, ^[] coupled with potentially greater marketing expense, could produce downside to our $8.30 price estimate for Motorola’s stock.

We estimate that Motorola generates roughly 29% of its stock value from mobile phones. Motorola’s mobile phones have benefited from notable support from Verizon in the recent past, with Verizon reportedly spending $100 million on an ad campaign for Motorola’s first smartphone Droid in 2009. ^[]

However, the situation could change once Apple’s iPhone launches on Verizon’s network, which could occur as early as Q1 2011. Not only could Motorola incur greater marketing expenses, but its already dwindling market share could come under more pressure from increasing competitive dynamics.

Special Offer:? Once a month, Jim Oberweis updates his model portfolio of small cap growth stocks that often return 1,000% and more–a hit parade of monster stock tickers like HANS, BIDU, NTES, FMCN, CTRP, CHS, LULU. His readers bought Netflix in 2003 at $13 per share. What’s new for December and yearend? Click here for the December Oberweis Report.

Gauging the Impact of Market Share Loss

Verizon has openly supported Google’s Android operating system, as Apple has an exclusive contract with AT&T for Apple’s iPhone. Motorola has been the leading manufacturer of mobile phones on the Android platform this year, and is aiming to launch over 20 smartphones in 2010. ^[]

Verizon’s support for Android could soften as it gears up for the potential iPhone launch, putting downward pressure on Motorola’s market share. More importantly, Motorola would likely incur higher marketing expenses in an effort to sustain its market share.

Motorola’s selling, general, and administrative (SG&A) expense as percentage of gross profits is expected to decline from a peak of 51% in 2007 to 41% in 2010, ^[] and could continue to decline to around 31% by the end of Trefis forecast period.

However, as Motorola is forced to spend more to promote its smartphones on Verizon, our base case SG&A estimates could prove conservative. There could be a downside of more than 15% to our price estimate if the company’s SG&A expense as a percentage of gross profits remains constant at 41% through the Trefis forecast period, instead of the decline that we currently forecast.

Increasing marketing spend is also no guarantee to Motorola’s ability to sustain market share. Motorola could face higher competition once the iPhone launches on Verizon as Verizon’s loyal users might choose to trade in their Motorola phones for an iPhone. Motorola’s market share is expected to decline from a high of 22% in 2006 to 2.8% in 2010, ^[] and could continue to decline to 1.6% by the end of Trefis forecast period.

There could be a downside of around 8% to our price estimate if Motorola’s market share drops to 1% by the end of our forecast period.

Should these two scenarios materialize, there could be a potential downside of roughly 25% to our $8.30 price estimate for Motorola stock.

You can see the complete $8.30 Trefis Price estimate for Motorola stock here

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured site: So, Why is Wikileaks a Good Thing Again?.

View the original article here

Cost Cutting Could Unlock Upside At Motorola

Motorola’s research and development (R&D) expense to gross profit ratio is now coming down quickly thanks to aggressive cost cutting measures and improving sales. Motorola primarily competes with Research in Motion, Apple, Nokia and Google in the mobile phone market which have all taken market share from Motorola in recent years.

Motorola’s R&D expenses increased from around 30% of gross profits in 2006 to around 45% by end 2009, ^[] as its margins shrank faster than the actual R&D spending. For 2010, this figure could actually come down to around 35% by our estimates.

If the R&D expense ratio drops in coming years as sales pick up, we could see an increase in our price estimate. We currently have a Trefis price estimate of $8.30 for Motorola’s stock, which is close to the current market price.

Aggressive Cost Cutting

Motorola revenues and market share declined in recent years forcing the company to undertake several cost cutting measures. In addition to laying off around 8,000 employees in 2008-09, Motorola cut salaries of top management and froze pension plans. ^[][] While this helped bring expenses under control, the company likely missed out on revenues as new products, like smartphones, reinvigorated growth.

Improving Sales Reduce Cost Burden

In Q3 2010, Motorola recorded its first quarter of growth in almost four years led by the success of its Android based smartphones, Droid and Cliq. Motorola stated that its total cash increased to $9 billion. The revenues from its mobile phone division grew 20% compared to same period last year. ^[] This is good news for Motorola’s whose margins have been dormant from quite some time.

If Motorola is able to continue its success with Droid, its leading smartphone product, and margins inch up, the company could well keep its costs in check.

The average forecast of Trefis members for R&D as % of gross profit indicate a decrease from 35% in 2010 to 26% by the end of the Trefis forecast period, which is similar to the baseline Trefis estimates.

Our complete analysis for Motorola’s stock is here.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

What A $100 Smarphone Could Mean For Motorola

Mobile phones account for about 30% of Motorola’s stock price, meaning the company is heavily impacted by the average price at which it sells such devices and its share in the broader mobile phone market.

The most lucrative segment of the mobile phone market, smartphones, is dominated by players like Nokia, Apple, Research in Motion and recently introduced phones based on Google’s Android operating system.

We currently have a Trefis price estimate of $9.08 for Motorola’s stock, about 11% above the current market price of $8.15. Lower Motorola smartphone prices could help spur gains in Motorola’s mobile market share; however, such pricing may eventually be matched by competitors and the overall lower prices of smartphones could potentially hurt Motorola.

Motorola’s average mobile phone pricing decreased from $147 in 2005 to $130 in 2008 before rebounding to an estimated $214 in 2009 as a result of a higher mix of smartphones. 27% of Motorola’s mobiles phones were smartphones in Q1 2010, and this figure increased to 42% in Q3 2010.

The average forecasts for Motorola Mobile Phone Pricing created by Trefis members indicates a projected increase from $214 in 2010 to $249 by 2016, compared to the baseline Trefis estimate of an increase from $214 in 2010 to $231 by 2016. The member estimates imply an upside of 2% to the Trefis price estimate for Motorola’s stock.

In contrast to the average Trefis member estimate, there could be a downside of 13% to the Trefis price estimate for Motorola if the company’s average mobile phone pricing were to reach $100 by the end of the Trefis forecast period as result of faster commoditization of smartphones.

However, lower Motorola smartphone prices could help the company if it is able to beat the competition on pricing, attracting a wider set of smartphone buyers and driving up Motorola’s mobile phone market share. The Trefis price estimate for Motorola’s stock could double to $18 if the company can achieve 9% market share by the end of the Trefis forecast period.

You can modify the forecast below to see the sensitivity of Motorola’s stock to mobile phone market share.

Our complete analysis for Motorola’s stock is here.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Motorola Best Deals

Motorola best deals on all networks, Compare motorola mobiles with best tariffs in uk.

View the original article here

Motorola Flipout Deals

Motorola Flipout best deals - Compare free or cheapest motorola flipout contract deals from all of uk phone shops.

View the original article here