Motorola, Inc'

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Motorola, Inc.

• Juan Cristales
• Abiy Dawit
• Dana Hernandez
• Martin Holmes
• Steven Montgomery
• Michael B. Sprung

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Background Analysis

• Motorola History
• Originally founded as the Galvin Manufacturing
  Corporation in 1928.
• Founded by Paul V. Galvin and Joseph E. Galvin in
  Chicago, Illinois
• Galvin Manufacturing Corporation becomes
  Motorola, Inc. in 1947.

• Motorola, Inc. is a global leader in
  
• wireless, broadband and automotive
• communications technologies and
• embedded electronic products.
• Wireless, Broadband, Automotive, and
• Semiconductor are the 4 major
• components of Motorolas
• communications technologies and
• embedded electronic products.

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Board of Directors
EDWARD J. ZANDER Chairman and Chief Executive
Officer Motorola, Inc
MIKE S. ZAFIROVSKI President and Chief Operating
Officer Motorola, Inc.
JUDY C. LEWENT Board Member
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Wireless Communication Segment

• Handsets
• Wireless Networks 
• Mission-Critical Information Systems
• 14 Revenue (2003)

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Handheld Market Share Leaders In Wireless
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Broadband Segment

• End-to-end digital broadband entertainment,
  communication and information systems for the
  home and for the office. 
• 6 of total rev. (2003)

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Automotive

• Leader in embedded telematics systems that enable
  automated roadside assistance, navigation and
  advanced safety features for automobiles. 

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Semiconductor

• Leading producer of embedded processing and
  connectivity products for the automotive,
  networking and wireless communications industries
  through our majority-owned subsidiary, Freescale
  Semiconductor, Inc.
• 17 of total rev. (2003)

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Four major segments Wireless, Broadband,
Automotive, and Semiconductor
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Growth Rate

Growth Rates are Excellent
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Price Ratios
Price Ratios are Satisfactory
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Profit Margin
Profit Margin is Fair
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Financial Condition
The Financial Condition is Fair
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Financial Ratios Conclusion

• Based on its financial ratios,
• overall Motorola is performing Fair.

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Price 8/5/2004

• Close 15.29
• Volume 9.177 Mil

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Holding Period Return
The HPR for 2004 assumes that the price of the
stock will reach 21.26. This is an excellent
return.
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Free Cash Flow To Equity
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Risk Analysis
Beta COV(RMOT,RSP500)
VAR(RSP500)
The Beta for Motorola has increased since 2001,
but has remained relatively stable over the past
three years. Technology for the mobile phone
industry is highly competitive and therefore more
risky by nature. The Beta for Motorola over all
five year (2000-2004) was above one. This means
that an investment in MOT is more risky than the
average security in the market. This risk is a
weakness and causes a higher required return from
investors.
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Cost of Equity
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Comparison Capital Structure
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M M Proposition Chart
Motorola does not fall under any model.
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Market Efficiency
Company Specific News
21APR04
Motorola Reports Strong Earnings The Company
reported strong first-quarter results, driven by
sizable 42 increase in revenue that included
improvements in every major division, even its
long-struggling cellphone unit. This event shows
that Motorola stands in the Weak Form of market
efficiency.
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Non-Company Specific News
30JUN04
Encouraged by the U.S. economic recovery, the
Federal Reserve boosted its overnight interest
rate target from 1 percent to 1.25 percent on
Wednesday (June 30, 2004), the first increase in
four years. The companys stock began a steady
decline for several weeks. This significant drop
of about four dollars over that time frame
indicates a No Form of market efficiency exists
for the Motorola company. Therefore, insiders can
earn excess returns.
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Strengths Weaknesses

• Strengths
• Financial Ratios
• Sales
• EPS
• ROA
• Stable WACC
• Established Firm
• Excellent Management

• Weakness
• Financial Ratios
• Gross Margin
• Sales 5-yr avg
• Small Dividends

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5 Year Stock Price Evaluation
Since January of 2000, Motorola has experienced a
steady decline in value, with a recent upturn
that began in January of 2003.
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Analyst Opinion

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Buy, Sell, or Hold?

• Examine the analysts opinion, most analysts rate
  the stock as a strong Buy, a Buy and a hold. So
  on average we took it as a buy.
• The DCF model gave us a large Ke over 200 This
  is because of an increase in FCFE year after
  year. The Ke min DCF model is gt Ke CAPM ( 200
  gt 8 ). So we believe the stock is underpriced
  at the current level of 17.32.
• The HPR return has been positive for MOT for the
  last year, based on analyst projections, HPR
  should be positive again in 2004, about 64
  higher.
• Finally, from analyzing the financial ratios we
  see more strength than weaknesses. In conclusion
  we recommend the stock as a Buy.