An Analysis of Motorola Stock
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An Analysis of Motorola Stock:
Executive Summary:
Over 75 years ago, in the heart of Chicago, a small company was started with a vision to create something great. Paul V. Galvin, the founder of Galvin Manufacturing Corporation, later to be known as Motorola, felt he had a great product with the invention of the “battery eliminator”. This product allowed battery-operated items to be run on the electricity currents already established within buildings. Galvin had 5 employees and in the beginning had a balance sheet with assets just over $1,000. However, by the end of the first year the earning and potential of Galvin Manufacturing were apparent, when it made a “net earnings of $6,015.” (www.motorola.com) Although Galvin was proud of making six thousand he was completely amazed when his company made a net profit equaling almost 10 million just twelve years later. Even though profits were wonderful, the main reason that business was good was that Galvin pushed the company to continue to make innovative products and devices. This set the corporate mentality, which would stay with the Galvin Manufacturing Corporation, long after it became Motorola in 1947. (www.motorola.com)
Today Motorola is the master in the field of cell phones and electronic devices. Most of us have carried a cell phone at one time or another and the chances that it was a Motorola are significant. This company has managed to keep a large amount of market share within this ever-growing industry, which leads to high investor confidence and a relatively level stock price in an unstable industry.
The Exchange:
The New York Stock Exchange (NYSE), the exchange that lists Motorola stock (MOT), was registered with the U.S. Securities and Exchange commission on October 1, 1934. It has been a symbol of the US economy and maintains its influence on the economy by having an integrity level that cannot be matched. It has a self-regulating structure comprised of two separate divisions of its board; one made up of independent directors and the other comprised of a board of executives. This provides a checks and balance system allowing the Exchange to provide for market sensitivities and regulations (NYSE).
Companies listed on the Exchange have to fulfill certain requirements. They mostly deal with a “minimum distribution of a companys shares within the United States” (Listing Standards).
Here are a few of the listing standards:
Round-lot Holds (A)
2,000 U.S.
Or
Total Shareholders (A)
2,200
Average Monthly Trading Vol.
100,000 Shares
Or
Total shareholders (A)
Gross Revenue most recent yr
$75 million
Or
Pretax Earnings for 3 yrs
$10 million
Motorola Company and Earnings:
Motorola has a unique skill of repositioning itself when market conditions are tight and competition is high. Usually this means, a loss of market share, which Motorola sees as an opportunity for their research and development division to kick into overdrive. For example: in 2001 Motorola suffered a large decrease in earnings and as a result introduced “the first metal mobile phone, the Motorola V60, with anodized aluminum housings, internet access, text messaging capabilities and voice activated dialing” (Motorola). This was just the beginning of a trend, which has led the cell phone users to wanting more, and only being satisfied with the best and most innovative tool currently available. In the days of “M life” standing for a mobile based life. Motorola has taken this way of life seriously and have made providing the tools to make this type of life possible, its corporate goal. After the V60, there have been several other cell phone types released with several other technological advantages. For example, cell phone with GSM, TDMA and DCMA technologies which increased cell phones sales by 67%.
Not only has Motorola developed cell technologies but they have also perfected the “Instant GPS” chip, which was the first single chip Global Positioning System in existence. The development of this chip made the accuracy of GPS systems more reliable and easier to integrate into other electronic devices (Motorola).
As a result of the innovations listed above Motorola recently bounces back with corporate earnings almost doubling in its personal communications segment. In the first quarter of 2003 it had earnings $2,447 million compared to first quarter earnings of 2004 have raised to $4,081 million. Its personal communications segments have now become the best worldwide seller.
(Source: www.prolytix.com/mot/main.html)
Company Performance: April 2nd, 2004 – May 21st, 2004
Motorolas performance between April and May 2004 was that of stable growth. If you had invested $1,000 in Motorola stock on April 2nd and cashed out on May 21st, you would have earned 6.1% or $60.1 per thousand dollars invested (Sharebuilder). This would seem like a significant amount of earning is you have invested more than $1,000 within that time period. For example, if you had invested $20,000 then the amount of earnings on your investment would have been $1,220 for a two-month period.
Motorola has experience a great deal of lows and not so many highs over the last year. As explained before, their earnings and sales were low due to having lost a significant amount of their market share in the communications arena, resulting in them needing to work diligently to regain it. In 2001, that was just the beginning and it took approximately 2 years for Motorola to again have a secure place in the communications market, which is the source of a significant amount of their earnings. Evidence of this is shown in their 52-week low stock