Just weeks after its debut, Motorola Mobility(MMI) warned that sales were slowing in the face of Verizon’s iPhone introduction. Despite reporting a profit and beating analyst estimates by $.01, the stock traded down sharply as the company projected a loss for the current quarter.
Analysts had, on average expected earnings of $.01 for the current quarter. MMI is projecting a loss of between $.09 and $.21, a wide range that shows there remains great uncertainty about the company’s short term prospects. The company is down nearly 10% on the news in pre-market trading. It is important to note that the spinoff left the company with a strong balance sheet- $3.2Billion in cash and no long term debt. This cash position is especially substantial given the company’s market capitalization will be below $10Billion at this morning’s open.
The company sells a commodity product in a hugely competitive industry and has historically been unable to generate consistent profits. The combination of the cash position and post-spinoff selling may eventually create a compelling value, but we don’t appear to have reached that point yet.
Disclosure: The author has no position in any stock mentioned, but does own a Motorola Droid phone
- Motorola smartphones disappoint, iPhone already weighs (reuters.com)
- Motorola’s Children Look Way Too Fat (blogs.forbes.com)