Motorola: Bernstein Sees Big Upside In Break Up
By Eric Savitz
Motorola (MOT) is worth more dead than alive.
That’s the conclusion of Bernstein Research analyst Pierre Ferragu, who late today launched coverage of the company with an Outperform rating and $11 price target. Ferragu writes in a research note that on a sum-of-the-parts basis, Motorola appears undervalued.
“We believe the company deserves a strong conglomerate discount as it stands today, as a combination of four businesses with little synergies,” he writes. “But credible break-up scenarios exist and could materialize in 2010, potentially generating ~50% upside to the recent stock price.
Here’s a rundown on his sum-of-the-parts analysis:
Networks business could benefit from consolidation in the telecom equipment sector; potential suitors include Nokia Siemens Networks, Huawei and Ericsson. Estimates value at 50-90 cents/MOT share.
Home division, including cable set-top box business, is “a strong candidate” for spin or private equity buyout; he sees value at $1.90-$2.30 a share.
Enterprise Mobility Solutions also could stand on its own or go private, he says, and is worth $4.30-$4.60 a share.
Devices is basically a bet on the turnaround of the company’s handset business; he thinks one possibility would be combination with Sony-Ericsson; estimated value, $1.80-$3 a share.
Add that up and you get a valuation of $10 to $12.20. He thinks the break-up of Motorola is “likely to happen in 2010.”
MOT, which fell 5 cents to $8.13 in the regular session, in late trading is up 16 cents, or 2%, to $8.29.
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