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Technology Stocks : Motorola (MOT)
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To: JakeStraw who wrote (2761)3/20/2007 1:24:29 PM
From: pyslent  Read Replies (1) of 3436
 
Anyone think that Motorola will make a bid for Palm...?

I think it would a good fit at the right price. I think their product lines complement each other.

The Treo business generates $1.5B in annual revenue and has gross margins of around 35%. Palm's problems are operational; they don't have the scale or the resources to compete with the big boys. Motorola could run Palm's Treo business much better than Palm could. Motorola doesn't need Palm, but they would get a good ROI if they bought at this price. If they paid $1B in cash (net of Palm's $500M cash hoard and about $500M in NOLs), they would immediately be getting a business that generates $86 million in profit a year, without lifting a finger. That's an 8.6% annual return, which is probably better than Motorola's cash is currently generating. Add in some of Motorola's operational discipline, and they could probably cut Palm's operating cost in half, tripling profit without ANY topline growth.
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