February 15, 2007

D ear Mr. Berko: In September 2003, you recommended that I buy 1,000 shares of Motorola when it was trading at $8.50 and I did. I sold the stock last October at $25 and, thanks to you, I made $16,000. Now Motorola is trading at $18.96 and I'm wondering if you think it's attractive at this price. My broker thinks it is. In fact, I might buy 1,500 shares if you think it's cheap at this price.

I also like the company because it's an American company and their phones are made in the U.S., whereas all the other cell phones are made in Korea, Japan, etc. Because the dollar is losing its strength, I think it may be cheaper for a European to buy an American cell phone than one made in Japan. This should be excellent for Motorola's revenue growth and profits.

-- FS, Elgin

My Dear FS: Some folks always ding me about the stock in this column that goes down. So it's nice to know that someone will also give credit for the issues that rise in value. And while I'd like to take credit for that Motorola Inc. (MOT-$18.96) recommendation, I cannot. I've never recommended the stock. In fact, I stopped liking the company in late 1998, when I discovered that Robert Galvin (past chief executive officer and son of founder Paul Galvin) was incapable of having a sense of humor.

I remember Motorola when it made car radios, television sets, record players and cell phones shaped like a brick. Today, MOT is a leading manufacturer of cell phones, wireless networks, broadband stuff, embedded systems, integrated software and accessory products.

But MOT's slim, sweet and sexy Razr phone that became a trendsetter in the industry and helped revenues grow 50 percent between 2004 and 2006 has lost its buzz. That Razr had a 10-pixel camera, played music, had GPS, an MP3 player, video clip downloads, a Taser, Bluetooth, stereo speakers, Wi-Fi, a micro memory expansion slot, Internet e-mail, first aid kit, satellite radio, text messaging, radiation detector, graphics, Windows Mobile 5.0, Swiss Army knife, a color printer, HDTV, video games, mortgage calculator and buttons so small that you needed a hat-pin to dial the phone. However, the sound was so bad that users thought they were speaking in an echo chamber.

And so it is with most of these Star Wars cell phones: you can't hear clearly on the things, but they're loaded with enough software and hardware to crash a supercomputer or start World War III. What bloody idiots.

After eight straight quarters of market share gains, MOT announced that its last quarter had fallen far short of Street expectations. The Razr is a tired phone and MOT's spinoff phones are failing to make a connection with the public. In fact, recent market-share gains are primarily a result of selling low-profit phones to emerging markets.

MOT has a weak phone portfolio and I doubt that the company has the moxie or muscle to replace its successful high-tech Razr. In fact, there are just too many of these sleek, geeky gizmos on the market and not enough nerds to buy them. MOT is a $40-billion-plus company, its personal communications business accounts for 55 percent of revenues and nearly 65 percent of profits. Without a Razr replacement in its pipeline, MOT's earnings look razor-thin.

Although MOT's commercial, government and industrial divisions continue to be profitable, management, in its cell phone hubris, has sadly neglected to cultivate its bread-and-butter business. Motorola has been active on the acquisition trail and recently purchased Symbol Technologies (mobile computing and management and radio frequency identification), but management may not be hearing the wake-up call.

The Jitterbug phone (made by GreatCall Inc.), with big buttons, bright screens, clear and loud sound, easy-to-read text, is simple to operate and has stolen a hugely profitable niche market that MOT, in its high-tech focus, was too blind to see.

I would not buy the stock.

Address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@adelphia.net.