Turnarounds That Haven't Turned Around: Motorola (MOT, NOK, RIMM, CSCO)

Motorola Inc. (NYSE: MOT) has been a serial disappointment for shareholders and its turnaround has never come to a real fruition.  There was a period that Ed Zander was deemed as a savior, but by 2007 everyone figured out that Zander was an emperor wearing no clothes.

The company has made inroads with its Motorola Q, but when your competitors are Nokia (NYSE:NOK), Research-in-Motion (NASDAQ:RIMM), and many more it gets really hard to stand out in the crowd.  Recent forecasts may make for a tough 2008 for Motorola.  Recent strong sales of its new phone have failed to matter.

Motorola didn’t make an answer to Cisco Systems (NASDAQ: CSCO) after that tech and networking beast acquired Scientific Atlanta and didn’t gobble up a retail networking equipment play for a broader offering.  It wasn’t able to make Freescale a winner on its own, so it jettisoned it (employees used to refer to it as ‘Freefall’). 

After having spent six years in Chicago before moving away, let me be the first to tell you that it is a relief not having to read day in and day out about how the city’s top tech company is restructuring every month.  In fact, I can recall in too many years the number of times that Motorola was handing out pink slips.  It seems that the company has been doing layoffs or restructuring itself for 10 to 15 years. 

So Zander has been forced out.  Carl Icahn may make another big run at the company.  Its options are more limited for 2008 compared to 2007 because it has worked down much of its cash and liquidity.  It is possible that the endgame is a break-up of the company into 3 or 4 companies.  We have that under review for the Special Situation Investing Newsletter and that verdict is still outstanding.  Who knows for sure.

What is for sure is that it will be nice when one day this can be evaluated as an operating company with reliable earnings and reliable earnings projections.  We have yet to find a Dr. Pangloss analyst or institutional investor that can yet say that in the same sentence as Motorola.

With shares around $16.00, its 52-week trading range is $14.87 to $20.91.  Shares are actually still up 100% from the 2002 lows, but it has been too long to count since there have been $30 or $40 handles on this one. 

Maybe 2008 can be its year.  And maybe not.

Jon C. Ogg
December 19, 2007

Jon Ogg can be reached at [email protected]; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.