Motorola Has Too Much Money, Buy Nortel

Stocks:  (MOT)(JNPR)(NT)

Motorola is sitting on too much cash and Wall St. is worried that the company does not know what to do with it. Cash and securities less debt is about $7 billion.

Some institutions have floated Juniper and other telecom infracture companies, which are viewed as expensive compared to their earnings.

The obvious answer may be Nortel, which is run by a former Motorola exec. With a market cap of about $9.5 billion, Nortel trades at less than one time revenues. Morningstar loves the company and thinks its turnaround is well along: "Though it no longer dominates, Nortel is still the leader in optical networking systems. This is an area of the telecom equipment industry with great long-term promise.:" And, "Nortel has a diverse product line and well-established customer base that includes many of the largest global carriers. About 45% of sales come from outside North America."

Nortel would add $10 billion in revenue to add to Motorola’s $40 billion. And, the businesses are very closely related. Juniper, on the other hand, has about $2 billion in revenue. Its market cap is nearly $12 billion.

Too much cash at Motorola. Buy a turnaround on the cheap.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.