Tuesday, June 20, 2006

Don't give up on MOT just yet

Motorola still has compelling, innovative products and will continue to execute well. Nokia, before its latest endeavor, showed similar operating margins and profit margins as Motorola, but Nokia is now diluting its attractiveness with its involvement in a languishing networking division from Seimens. Combined with its already higher P/E, Nokia may see a heftier stock downturn based on investor pessimism. Recall that after Motorola spun off its semiconductor division into Freescale, both companies performed better. I suspect the converse may be true with Nokia's latest efforts, and this will help MOT work through the downturn better than NOK.

In summary, don't buy MOT now since it's likely to be cheaper in the fall, but long-term investors can hold their shares since I believe it will weather the downturn better, gain marketshare, and become a more attractive stock quickly when the market rebounds.

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