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To: Ruffian who wrote (70394)	4/11/2000 1:11:00 PM
From: LBstocks	Read Replies (1) \| Respond to of 152472

Alex Cena's MOT: Post Conference Call Highlights: Reiterate 1-M Rating Salomon Smith Barney ~ April 11, 2000 04/11/00 Motorola, Inc. (MOT $153.00,1-M,Tgt $200.00) Alex M. Cena --SUMMARY:--Motorola, Inc.--Telecommunications Equipment We continue to recommend MOT w/ 1-M rating. 1Q results were slightly better than expected at $0.59 vs $0.58 est. * We believe current mkt reaction is overblown focusing only on negative related to mobile phone margins. While mgns down YOY & QTQ, issues are temporary related to pdct mix, R&D, & component shortages. However, units up 37% YOY & unit sales up 70% YOY. * Market should also focus on positives including: (1) wless infra growth better than expected in revs & margins; also strong industry demand due to sub & capacity growth & (2) semi outlook continues to improve w/ industry gro ests increased again to 25% vs. 20%-25%. * We will fine-tune our model after discussions with management. 04/11/00 Motorola, Inc. (MOT $153.00,1-M,Tgt $200.00) Alex M. Cena --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/99 EPS $0.28A $0.44A $0.53A $0.82A $2.08A Previous 12/00 EPS $0.58A $0.70E $0.79E $1.12E $3.20E Current 12/00 EPS $0.59A $0.70E $0.79E $1.12E $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 Previous 12/02 EPS $N/A $N/A $N/A $N/A $N/A Current 12/02 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: 04/11/00 Motorola, Inc. (MOT $153.00,1-M,Tgt $200.00) Alex M. Cena --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:1M Prior:No Change Price (04/07/00)....:$153.00 P/E Ratio 12/00.....:47.8x Target Price..:$200.00 Prior:No Change P/E Ratio 12/01.....:36.0x Proj.5yr EPS Grth...:0.0% Return on Eqty 99...:7.9% Book Value/Shr(00)..:37.75 LT Debt-to-Capital(a)21.9% Dividend(00)........:$.48 Revenue (00)........:37420.00mil Yield...............:0.3% Shares Outstanding..:625.0mil Convertible.........:No Mkt. Capitalization.:95625.0mil Hedge Clause(s).....: Comments............:(a) Data as of the most recently reported quarter. Comments............: 04/11/00 Motorola, Inc. (MOT $153.00,1-M,Tgt $200.00) --OPINION:------------------------------------------------------------------ WE CONTINUE TO RATE MOTOROLA 1-M. Motorola reported a slightly better than expected first quarter with EPS of $0.59 vs. our consensus estimate of $0.58. We believe the market is currently over-reacting as it focuses only on the negatives in the quarter while overlooking the positives. On the negative side, mobile phone margins in the quarter were lower than estimated and did not improve year over year or quarter to quarter. Margins were weaker than expected for two reasons: product mix and other issues. Related to product mix, the company saw greater than expected demand for low-end phones due to the strength of the pre-paid market especially in Europe. The company's higher-end, higher-margin phones were affected somewhat by component shortages and timing in that they hit the market at the end of March and into April. Related to other issues, the company is investing heavily in R&D to support data on its phones. In fact, Motorola's WAP-enabled phone line up is 2-3x more than its nearest competitor, as can be reviewed in detail in our latest Global Telecom Equipment Investor report, which is available now. Motorola is working to be sure it does not duplicate its misread of the wireless phone market again as it did during the transition to digital from analog phones and it is aggressively focusing on the next big move in mobile to wireless data. There was also some pressure from component shortages that affected the number of higher-tier phones that could be shipped as well as margins. However, product mix accounted for an estimated 75% of the miss in phone margins. On the positive side, we believe the mobile phone margin issues are temporary. For example, the company should be able to put the component pressures behind it by the end of the second quarter. And, new lower level phones are soon to hit the market that have improved margins and more mid to high tier phones will also be shipping in the second quarter. Second, the wireless infrastructure business was better than expected both in revenues and margins. In fact, the infrastructure business has better visibility and is less competitive than handsets, which gets a premium valuation. The important aspect to focus on is that infrastructure demand is very robust driven by subscriber and capacity growth. Thus, some final acceptance of networks in the third and fourth quarter is related to the company's conservative revenue recognition policy and is not a demand issue. Third, the semiconductor business continues to improve with the industry growth forecast increased again up to 25% from a range of 20% to 25%.