By Jon Fortt
July 16, 2007

Deutche Bank Securities analysts Bryan Modoff and Jonathan Goldberg tried the “how much worse could things get?” argument this morning as the firm upgraded Motorola to a buy, saying bad news is already priced into Motorola’s (MOT) stock. “The market is now fully aware of the extent of their earnings weakness, the anemic demand for their handsets and their inventory woes in several areas,” they wrote. Hardly a ringing endorsement for Motorola shares, or CEO Ed Zander’s leadership.

Bloomberg reports further on the upgrade:

The analysts said they expect Motorola earnings growth to improve as the company’s reshuffling of senior management comes to an end. The new management will emphasize reducing costs as well as clearing out inventory and “mis-placed” products, the San Francisco-based analysts wrote.

The shares were upgraded from “hold,” and the share-price forecast was raised $3 to $21. …

“We still anticipate a few more high-level changes in the management team, and many in the market expect the CEO’s departure,” the analysts wrote. “Beyond this, however, we feel there is now a clearer picture internally as to who is running the various pieces of the company and which direction they are headed.”

Motorola reported its first loss in almost three years in the first quarter as Nokia (NOK) Oyj and Samsung Electronics Co. won market share with new devices. Motorola has struggled to create a phone to replace Razr, leaving the company without a rival to Apple (AAPL) iPhone, released June 29.

Deutche Bank’s argument comes close to the one I hinted at on Friday, when I noted that BlackBerry maker Research in Motion (RIMM) has outstripped Motorola in market value, even though it has less than a tenth of Motorola’s sales. Considering where Motorola is priced, it shouldn’t take much good news for the stock to pop.

Still, the company makes me a little queasy. I still remember when Apple introduced the Motorola ROKR and the iPod nano on the same day about three years ago, and the Apple folks quietly told me they weren’t excited at all about the Motorola device Apple has co-developed. Motorola didn’t get the smartphone/media phone market, they said, and hadn’t built the device Apple had wanted. “The real news,” one of them told me, “is the nano.”

Of course, the nano went on to become the most successful iPod ever, and Apple moved on to develop the iPhone on its own. And Motorola? Well, today’s “worst is now over” note sums it up.

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