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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: llwk7051@aol.com who wrote (5373)	1/18/2000 10:34:00 AM
From: LBstocks	Respond to of 13582

Alex Cena's comments re MOT earnings> MOT: On Balance, A Good 4Q99 Above Consensus Qualcomm Inc(QCOM)* Rating: 1H 19980915 Salomon Smith Barney ~ January 18, 2000 01/18/00 Motorola, Inc. (MOT $150.25,1-M,Tgt $200.00) Alex M. Cena --SUMMARY:--Motorola, Inc.--Telecommunications Equipment * Last night, MOT released its 4Q results ending December. On balance, solid qtr that was above consensus & pretty much on top of our forecasts * Operating EPS of $0.82 compares to consensus of $0.80 & our $0.83 est * Ongoing Revs increased 7% vs our 6% forecast * Operating mgn of 8.9% was on target w/ our ests but were surprised on the upside on wless infra as well as comm'l ,govt & ind'l, while phone margins didn't return to double digit margins during qtr though up Y/Y & Q/Q * Wireless infrastructure orders were up 48% (w/o Iridium) * Mobile phone sales could be up Q/Q in 1Q2000 i.e. demand robust * ALL of Iridium operating exposure now GONE w/$740mm special charge * Balance sheet remains solid * Our estimates are unlikely to change for the full year 01/18/00 Motorola, Inc. (MOT $150.25,1-M,Tgt $200.00) Alex M. Cena --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/98 EPS $0.23A $0.01A $0.07A $0.26A $0.57A Previous 12/99 EPS $0.28A $0.44A $0.53A $0.83E $2.08E Current 12/99 EPS $0.28A $0.44A $0.53A $0.82E $2.08E Previous 12/00 EPS $N/A $N/A $N/A $N/A $3.20E Current 12/00 EPS $N/A $N/A $N/A $N/A $3.20E Previous 12/01 EPS $N/A $N/A $N/A $N/A $4.25E Current 12/01 EPS $N/A $N/A $N/A $N/A $4.25E Footnotes: 01/18/00 Motorola, Inc. (MOT $150.25,1-M,Tgt $200.00) Alex M. Cena --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:1M Prior:No Change Price (1/14/2000)....:$150.25 P/E Ratio 12/99.....:72.2x Target Price..:$200.00 Prior:No Change P/E Ratio 12/00.....:47.0x Proj.5yr EPS Grth...:0.0% Return on Eqty 99...:2.8% Book Value/Shr(00)..:28.44 LT Debt-to-Capital(a)17.9% Dividend(00)........:$.48 Revenue (00)........:35428.00mil Yield...............:0.3% Shares Outstanding..:624.4mil Convertible.........:No Mkt. Capitalization.:93816.1mil Hedge Clause(s).....: Comments............:(a) Data as of the most recently reported quarter. Comments............: 01/18/00 Motorola, Inc. (MOT $150.25,1-M,Tgt $200.00) --OPINION:------------------------------------------------------------------ ON BALANCE, A GOOD 4Q REPORT ABOVE CONSENSUS Last night, Motorola reported its financial results for the quarter ending December. For the quarter, operating earnings were $0.82 compared to consensus of $0.80 and our $0.83 forecast. Ongoing revenues increased 7% year on year to $8.5 billion from $7.9 billion. Ongoing revenues exclude businesses that were sold or divested. If revenue from Iridium were excluded, Motorola's revenue would have grown 11% year on year, representing the 2nd quarter in a row that the company's top line growth has returned to double digits. Since the company was essentially in-line with our forecasts, we are unlikely to be make any material changes to our full year estimates. We characterize the report as a good quarter that was above consensus & on target with our figures. The big positives are that: 1) mobile phones will be up sequentially vs the normal pattern of down 10%-15% QTQ in March; 2) Iridium investment completely written off; 3) semiconductor top line growth better than expected; 4) wireless infrastructure margins better than expected; and 5) wireless infrastructure orders were up 48% without Iridium The negatives were that more than 25% growth in mobile phones was offset by more than a 25% decline in paging; and mobile phone margins and semiconductor operating margins did not see the improvement we thought could occur this quarter. REVENUE STRENGTH FROM PHONES, SEMIS & COMMERCIAL Revenues were driven by Personal Communications, which increased 13%, Commercial, Govt & Ind, which increased 7%, Semiconductors, which increased 15% and other products which rose 13%. Growth in these businesses were offset by an expected decline of 14% in wireless infrastructure. Of these results, Semiconductors, Commercial, Govt & Ind were above expectations, while Personal Communications were below our 24% growth forecast. While mobile phone sales were up more than 25%, the growth in the sector was offset by a more than 25% decline in the company' s paging business that continues to be penalized by lower volumes and pricing pressure. PHONE SALES LIKELY TO BE UP IN MARCH QTR VS. USUAL SEASONAL DECLINE The company's release did indicate that mobile phone sales are likely to increase from the December 1999 quarter to the March 2000 quarter as opposed to the normal seasonal pattern of a 10%-15% sequential decline. Motorola is entering the March quarter with a significant backlog of orders for its digital mobile phones due to a combination of robust demand as well as Motorola's inability to produce more than its plan due to continued tight supply of components. While the availability of components continues to improve on a sequential basis, it still is not at a rate that would enable the company to reach the upper boundaries of demand. ON TARGET OPERATING MARGIN DRIVEN BY INFRASTRUCTURE Operating margin for the company was on target at 8.9% though the company did not attain it the way we thought they would. For example, wireless infrastructure operating margin was almost 200 basis points above our forecast, while commercial, government and industrial margins were more than double our estimate. On the other hand mobile phone margins were only 7.0% compared to our assumption it could reach as much as 12.8% and semiconductor operating margins were sequentially flat at 4.6% as opposed to our 5.9% assumption.