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As you are probably aware, we wrote up Motorola at $11.02 per share on September 18, 2003. At that time, Motorola was selling at about one times sales in an industry where all its competitors are selling at 3 times revenues. It was very, very cheap at the time and remains cheap. The problem for us in the past is that Motorola was lagging the market and had been doing very little for several quarters. For the last several years in fact, Motorola has been a laggard. Well we think it is time for a change, and that change is right now. Motorola today announced that they are spinning off their Semiconductor Product Sector (SPS) division. The unit does about $5 billion in sales. The stock market will probably value it at two times sales or about $10 billion. The unit lost about a billion dollars in 2001 and $300 million in 2002. If we are right on the valuation, than $10 billion comes out to just about under $5 per share in Motorola's common stock. This brings the new market value of Motorola to about $17 per share in our opinion. We think Wall Street will need a few months to come to our opinion. At the same time, we think it is only a question of time before this value is realized. What you have here is now a classic restructuring story. We have a new management team coming into play at Motorola. That's a positive development. We now have the SPS spin-off. This will force the stock to trade up in the near term in our opinion. If Motorola trades up to the $16 or $17 value, than Motorola would still be trading at only about 1.3 times Motorola's revenue stream. Our revenue estimate for 2004 is a little under $28 billion. We are basing our numbers on this estimate. Keep in mind that 1.3 times revenue is still less than half of the value that the competitors are trading at. Don't be surprised if this stock gets to $17 per share, sooner than you think. Your Friends At StocksAtBottom.com JOIN NOW |
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