Thursday, May 31, 2007

Motorola (NYSE:MOT): Color on cost cuts

Couple of firms comment on Motorola (NYSE:MOT) after the co announced another round of cost cuts:

- Jefferies
notes that while MOT appears to be cheap, they believe it could take a year tosubstantially improve the company's handset portfolio. Other concerns include: 1) continued market share losses, 2) decline in iDEN business, and 3) 2H07 weakness in cable business.

The estimated cost savings of $600 million annually is about $100-150 million higher than what the firm hadanticipated, thanks to continued discretionary-cost controls, G&A expense tightening and site rationalization. These cost controls will affect all business segments. Jeffco's above-consensus estimates already bake in additional cost reductions. As such, they make no changes to their EPS estimates. Firm estimates $0.40/share for 2007 and $1.00/share for 2008, which compares to consensus estimates of $0.35 and $0.86, respectively. Maintains Hold and $19 tgt.

- Raymond James estimates the $600 million in annualized cost savings could represent incremental earnings of approximately $0.16 per share. While their 2008 EPS estimate of $1.07 is among the most optimistic on the Street, their aggressive estimates look increasingly realizable. In light of yesterday's announcement, the firm believes that management's actions may even provide additional upside earnings potential. RayJay expects to provide updated earnings estimates following the announcement of June quarter results.

Firm notes they are encouraged by the progress in Motorola's cost-reduction initiatives. Following an initial slow start, they credit much of the recent momentum to new Chief Financial Officer Tom Meredith. They continue to believe that the March quarter represented the low-water mark for Motorola, and expect the business to progressively improve through 2007. Reits Strong Buy on MOT.

Notablecalls: Well, MOT just cut 11% of its opex (based on 2006 number). Most Street estimates are starting to look very conservative here. I must agree with the analyst community here - it's going to take at least a year to come up with new and exciting handset models. Lucky for us, the market is forward looking in nature.

Btw, did you see the utter cock up called Foleo from Palm (NASDAQ:PALM)? Jesus, I mean...what the heck?!

No comments: