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Analysis to the Motorola SpinOff

Written by Meraj Chhaya on March 28, 2008 – 11:17 pm

Some days ago Motorola announced a SpinOff, in this case a separation of Motorola in two companies.

It is known that Motorola was preparing an operation like this some 2 months ago, but just now we had the official announcement. A SpinOff is always taken well by the investors, mainly because it will create 2 companies focused in their products, that normally aren’t competitors, which means that we can have a Motorola more focused in the mobile markets and more directed against its rivals, such as Nokia and Samsung.

But, that was what happened in 26th March. We saw a huge gap up (an opening superior than the last close), on which the stock plunged from 9,71$ to 10,30$.  But, in the afternoon the major analysts came with their reviews, and investors noticed that the spin off could not just generate 2 companies, but three or more.

This is a little bit scary because the company can lose its value and this would never be understood rightly by the stockholders and investors. A company with a relevant capital just focused in mobile phones and their applications is good, but two or there more would transform all the "Motorolas" new companies very small in relation to the big players. So, Motorola disappointed many by failing to offer answers to critical questions about the unit’s future on that afternoon conference, because other important questions about the proposed company, including its name, capitalization, key executives, intellectual property holdings, market share goals, reorganization and financial structure were left unanswered.

But, when Greg Brown (actual Motorola’s CEO) was asked to justify the spinoff he gave the following statement: "It would help with clarity of direction for employees and customers [and] help attract top-notch CEO candidates."

Yes, we can say "wow", and we don’t even need to justify, because the CEO didn’t!

Some analysts said that spinning off the mobile handset division will not dramatically alter its current product offering or change the perception that Motorola doesn’t know how to consistently win and keep customers through a wider set of innovative products. No big changes.

If the market sees nothing new in an action that will cost millions off course, If the markets don’t see any possibility to make "extra money", if the investors are disappointed, the markets simply falls down. And that was what happened, the market fell down, from 10,30$ to the lowest close price of the past 5 years (today),  9,21$. The markets always know what is the right thing, and probably the markets think that a SpinOff in this conditions isn’t good. And you can’t say this happens because all the markets were down. It’s totally false, because the markets had a nice week comparing to the others of this month.

Here is a daily graph, just to see the last drops from the news:

dailay Analysis to the Motorola SpinOff

And an yearly graph to show how things aren’t doing well from many time:

iarly Analysis to the Motorola SpinOff


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