Coinstar Shares Look Very Cheap After Guiding Down Earnings Expectations

Consumers should know Coinstar (CSTR) very well as the maker of coin counting machines found at grocery stores and more recently the owner of the Redbox DVD rental kiosks found in even more retail locations such as McDonald's and Wal-Mart. I believe the stock, which has gotten hammered lately after an earnings miss for the fourth quarter, represents tremendous value. CSTR gives investors a rare combination of value and growth potential.

At around $39 per share (down from $67 late last year), Coinstar stock fetches only 6 times trailing cash flow. To put that in perspective, Microsoft sells for 7 times, Cisco for 8 times, and IBM for 9 times. Investors are clearly getting a valuation that is otherwise reserved for larger, slower growth businesses. This despite the fact that the company just reported that 2010 revenue soared 39% on the heels of a 50% jump in DVD rental sales (the more mature coin counting business grew by 7%). Despite giving more conservative guidance going forward after the company missed Wall Street's fourth quarter expectations, Coinstar expects 2011 revenue to jump by about 24% with cash flow rising by 18%, as it continues to invest in growing the business. If management can deliver on these numbers this year (and after an earnings miss we should think they might give out forecasts they feel quite confident in reaching), the stock trades at only 5 times current year cash flow, unheard-of for a company growing like Coinstar.

Now, as with any investment, expectations and forecasts of future growth and valuation are not the only things to consider. Analysts would be quick to argue (and I would not disagree) that movie rentals are moving from disc-based to cloud-based, with the emergence of Netflix and other streaming platforms. Any market share gains that Coinstar's Redbox kiosks might see with the pending bankruptcy of Blockbuster could very well be negated by more and more people signing up for Netflix streaming.

However, I still believe that the market for Redbox kiosks is bright, for two main reasons. First, with nearly 25,000 kiosks installed in grocery stores and retail outlets across the country, the convenience and cost ($1 a day) of Redbox rentals will make them attractive to both cost conscience movie watchers (if you only watch a couple movies per month you will likely opt for Redbox over an $8/month Netflix streaming plan) and those who enjoy the convenience of grabbing a movie on their way out of McDonald's, Wal-Mart, or their local grocery store (just picture how easy children can convince mom and dad to get a movie for $1 before they leave the store).

The second reason I think it will be years before physical disc rentals will become completely obsolete is that there are still millions of Americans who are afraid of technology to a large degree (either due to things such as identity theft, or simply out of not being comfortable with operating high tech toys such as wi-fi enabled DVD players). To illustrate this point, let me share an encounter I had with a woman a couple of weekends ago.

After noticing that several Blockbuster locations were being liquidated near where we live, my fiancee and I decided to stop by and see if we could land any ridiculous deals (they were literally selling the store's shelves as well as the DVDs sitting on them). Everything was for sale, and if you had a spare $350 sitting in your bank account you could buy the giant gum ball machine from your local Blockbuster store (we saw one being carried out by a man as we entered the store).

As I was perusing the aisles I helped explain the pricing structure to a woman in her 50's or 60's who was confused. We got to talking and she was mostly rambling about how disappointed she was that this store was closing because all of the other DVD rental places had also closed and now there was nowhere for her to go. I mentioned Netflix and she immediately dismissed it as a viable option "because you need a credit card for the box." She was clearly confusing Netflix with Redbox, but the fact that she refused to use a credit card to rent a movie told me that Netflix would not be any better in her mind.

I bring this up because I think people like this woman are exactly the ones who will shun new technology like Netflix streaming. Eventually she will have to cave and start using Redbox for movie rentals most likely, and think about how many people like her there are out there. Not only that, but even if she felt comfortable using the Internet to order movies by mail (I don't see her using Netflix mail order anytime soon, given that her explanation for why that wouldn't work for her was that her printer has been broken for months and she can't figure out how to fix it), I really don't think she would proactively adopt such a technology when there are other "lower-tech" ways of getting a DVD such as Redbox (granted, a credit card will still likely be required).

In short, I think there will be room for both technologies for several years to come. While I subscribe to Netflix and have never actually used a Redbox kiosk, there are plenty of middle aged and older Americans who will. Not only that, but the Redbox kiosk in the grocery store I visit is often crowded with college kids as there are several universities in the area. Cost is probably the main factor there, as young kids can certainly operate Netflix streaming movies, but more likely lack the discretionary income to afford an expensive box with wi-fi and a monthly plan. So, there is definitely a market for Redbox with younger people too.

With Blockbuster in liquidation, Redbox should continue to grow, although Coinstar's current stock price seems to not fully be factoring in such strong demand for their kiosks. I do not see any reason CSTR shares should not fetch 7-8 times cash flow, which makes a stock price of $60 quite a reasonable expectation.

Full Disclosure: Long CSTR at the time of writing but positions may change at any time

Kodak: Horrible Fundamentals But Too Cheap To Short

At first blush shares of Eastman Kodak (EK) appear to be an attractive candidate to short. Digital cameras have essentially eliminated the company's largest and most profitable revenue generator (traditional film) and sales have been declining for years. Kodak's answer to a disappearing business has been to focus on digital hardware such as their own camera line as well as a foray into the world of ink jet printers and cartridges. The glaring problem with this strategy is that they are shifting from a very high margin, uncompetitive area (film) to a very low margin, highly competitive one (consumer electronics). The results thus far have been predictably poor. Over the last five years EK stock has plunged from $30 to under $4 as sales have declined and profits have all but disappeared during what they dubbed a "digital transition."

Since I really do not envision the fundamentals for Kodak improving, it is a prime choice to look into as a potential short candidate. After such a dramatic fall, however, coupled with 24% of the outstanding float already sold short, there does not appear to be much room to the downside, in the near term anyway. This is mainly because Kodak has managed to successfully clean up its balance sheet in recent years (an imperative when a business is in decline) to the point where they now have net cash (cash on hand less gross debt) of about $150 million. And while revenue is certainly declining, they still bring in about $7 billion a year in sales. Such figures make the current stock price ($3.75) and equity valuation ($1 billion) look reasonable enough that shorting now is not all that exciting to me.

Considering Kodak's current equity value of $1 billion and revenue run rate of about $7 billion annually, the company only needs to earn a net profit equal to 1.4% of sales to earn $100 million annually, which would give the stock a P/E ratio of 10. Therefore, in order for a short position to work well at current prices, the P/E would have to drop far below 10, sales would need to fall off a cliff, or they would have to start to bleed cash. While the business fundamentals are poor, none of these scenarios seem like a high probability event in the near term. More likely, Kodak will continue to slowly lose revenue, run the business at break-even or slightly above, and the stock will trade at a discount based on their weakened market position. While these facts would not make Kodak stock a good investment at current prices, there does not seem to be a huge amount of downside either, barring some unforeseen event.

Full Disclosure: No position in Kodak at the time of writing, but positions may change at any time

Apple Stock Can Easily Reach $450

I often get a little bit of flak from a handful of fellow value investors when I write about owning tech companies such as Apple (AAPL) or Research in Motion (RIMM). How can you call yourself a value investor and own growth stocks like these, they ask? For me it all comes down to valuation, not growth rates. If RIMM trades at 9 times earnings, why would I not want to own it as a value manager? It trades at a huge discount to the market and its peer group. Isn't that what value investing is all about, finding stocks trading at a discount? If two stocks I am looking at both trade at 9 times earnings, but one is growing at 5% a year and the other is growing at 25% a year, I am going to favor the one growing at 25% a year (all else equal) because it has even more upside. That should not mean that I am abandoning my core investment strategy. When the stock reaches a market multiple and no longer trades at a discount, I will sell and move on.

Which brings me to Apple. How can I justify continuing to own Apple after the enormous move the stock has made over the last decade? Because for some strange reason it still trades at a discount. The company just reported quarterly earnings of $6.43 per share, more than $1 above estimates, giving them an annual earnings run rate of nearly $26 per share. Even after a solid after-hours rally the stock sits at $344 which is really more like $280 after you net out the $64 of cash and no debt on their balance sheet. Apple stock, therefore, trades at an astounding 11 times its annual earnings run-rate,  a 20% discount to the S&P 500 index, which is why my clients still own it.

When will I sell? Well, if we assign a 15 P/E to nearly $26 of earnings and add back $64 per share of net cash, we get about $450 per share. At that price the stock would no longer trade at a discount to either the market or its peer group, so I will move on. Even at $450 growth investors will likely still argue that Apple is "cheap" based on their growth rate (they often are willing to pay up to a P/E of twice a company's growth rate), but that is a growth investor's mentality. And although it is hard for some to belief, it is not the one I use when allocating clients' investment capital.

Full Disclosure: Long shares of Apple and Research in Motion at the time of writing, but positions may change at any time

Motorola Doubles Down on Cell Phones with Mobility Unit Spin-Off, But Should Investors Tread Carefully?

Motorola's long-planned corporate break-up became official last week as the stock split into two distinct business units; Motorola Mobility Holdings (MMI) and Motorola Solutions (MSI). The former will encompass Motorola's consumer unit (cell phones and cable set-top boxes) whereas the latter will serve the enterprise sector.

Analysts have been praising Motorola Mobility as a way for investors to play the rise of Android smartphones and Motorola's success with the Droid product line. In fact, just this morning Bank of America Merrill Lynch initiated coverage of MMI with a buy rating and $38 price target (the shares currently trade around $32).

Making a bet on a cell phone pure play, without a stronghold on a certain niche of the market a la Apple or RIM, seems risky to me. After all, this industry is extremely competitive and aside from Apple and RIM, companies make very little money selling cell phone hardware. Palm was forced to sell itself to HP and after their success with the RAZR phone many years ago, Motorola struggled mightily before their Droid came along. Other giants in the space like Samsung and LG have diversified electronics product offerings so they do not need to rely on cell phones for strong profits. And new competitors enter the market all the time. We just learned that LCD TV maker Vizio is planning to launch Android phones and tablets and HP is set to launch a line of phones this year based on the Palm webOS operating system they acquired.

Perhaps the biggest reason to be cautious about Motorola Mobility is the fact that Apple is set to give Verizon the iPhone shortly. The Droid has done pretty well on Verizon in large part due to the fact that Verizon is the largest U.S. phone carrier but has not had access to the iPhone before. Loyal Verizon users have been using Blackberry and Droid phones but that could change dramatically when Apple's products are made available to them.

All in all, it seems that everyone is jumping on the Android bandwagon. This is definitely good for consumers but I have to question how all of these players are going to make good money by selling what is essentially the exact same commoditized product. Is a Motorola smartphone or tablet computer running Android really going to be able to differentiate itself from an Android-based product from Samsung, LG, Dell, or anyone else? Seems unlikely, and without doing so these hardware companies are going to be at each others' throats, which reduces pricing power and mostly importantly, profit margins. Computers makers like Packard Bell and AST have long been extinct because they could not outsell their competitors with largely identical products (Windows-based computers). Why would the tablet PC market or the phone market be any different?

Digging into Motorola Mobility's numbers hardly paints an overly bullish picture either. While it is true that the company has stemmed losses in its cell phone division, which was losing hundreds of millions of dollars just a few short quarters ago, the business is still not making money (operating margins were 0% last quarter). With a strong launch of the Droid and reduced competition within Verizon's customer base, Motorola still isn't making a dime selling smartphones today. It is hard for me to see how that situation improves materially after the iPhone launches on networks outside of AT&T, but Motorola's long-term goal is an operating margin of 8-12%. Seems overly optimistic to me.

The overseas markets could potentially be a strong area of focus for Droid, but Motorola Mobility gets 68% of their revenue from North America, so they are not big players in Europe or Asia. MMI is also more than just cell phones, with one-third of their revenue coming from a leading market share position in the cable set-top box market, but that industry seems poised for competition too. Would it surprise anyone if Apple or Google eventually launched their own cable box to compete with digital cable? Growth potential in set-top boxes seems lackluster and Motorola's leading market share could come under fire. In fact, I just read that companies are already working on ways to build cable box technology directly into television sets, thereby eliminating the need for cable subscribers to have a separate cable box at all.

All in all, color me pessimistic about the outlook for Motorola Mobility, the company's new pure play cell phone company. At $32 per share, MMI shares trade at 28 (corrected 11:50am) times 2011 earnings estimates of $1.16 and given that the company lost money in 2010, I think those projections for future quarters may prove difficult to achieve. MMI does give investors a strong balance sheet ($3.5 billion in cash and no debt), but given high research and development costs, coupled with a cell phone business that is only breaking even right now, and it is entirely possible that their cash hoard may dwindle over time.

Full Disclosure: The portfolio that Peridot Capital manages on Wealthfront was short shares of MMI at the time of writing, but positions may change at any time

After Missing The Latest Quarter, Cisco Shares Are Dirt Cheap

There is no doubt that earnings season is my favorite time of year from an investing perspective. Every quarter Wall Street overreacts to dozens of seemingly disappointing profit reports and punishes stocks in the process. For a deep value, contrarian investor like myself, it's Christmas, Hanukkah, and Kwanzaa all wrapped into one. One of this month's best holiday doorbusters has to be networking giant Cisco Systems (CSCO), whose shares have fallen 20%, from $24 to $19, after the company guided down for the current quarter.

Now, I understand that investors hate quarterly misses, especially for larger companies like Cisco whose businesses typically have far more visibility than smaller upstarts. That said, Cisco's current valuation (12x trailing earnings, 7x trailing cash flow, and 11x 2011 profit estimates) makes it seem like this company is barely growing at the rate of GDP. That does characterize some mature tech forms such as IBM (IBM), which only grows sales at 3%-4% and also fetches about 11 times earnings.

Despite recent softening in some of their businesses (especially sales to governments), Cisco is still growing sales and earnings at double digit rates and should continue to do so. This is a classic case of getting to buy a company that is growing faster than the S&P 500 at a discount to the market's overall valuation. Not to mention that Cisco is a leading company in an excellent and highly profitable industry. I would be quite surprised if Cisco shares didn't reclaim all of the recent losses sometime over the next 12-18 months.

Full Disclosure: Peridot Capital was long shares of both Cisco and IBM at the time of writing, though positions may change at any time.

RIMM: 76% Earnings Growth for Under 10x Trailing EPS

The market's initial reaction to last night's earnings report from Blackberry maker Research in Motion (RIMM) made sense to me. The stock popped about $4 after-hours to over $50 per share after the company blew past analyst estimates for their latest quarter. Earnings per share came in at $1.46 (est: $1.35), revenues were $4.62 billion (est: $4.47 billion), and subscribers grew 4.5 million to over 50 million.

This morning, however, those gains from last night have all but vanished (the stock is up less than $1 as I write this). I have been bullish on the stock at recent prices (in the mid 40's) based on a ridiculously low valuation (10 times trailing earnings) for a company that is still growing like a weed, despite the introduction of the iPhone and an ever-growing selection of phones running Google's Android operating system. Given how fast the smartphone market is growing, coupled with nearly 40% market share for the Blackberry, it is my belief that RIM can still grow quite nicely, which if true, should eventually result in solid gains for the stock, due to its low P/E.

Last night RIM reported sales growth of 31%, earnings per share growth of 76%, subscriber growth of 56% and unit shipment growth of 45% versus the year-ago period. To me, these figures illustrate that my thesis (the company can still grow thanks to a strong position and a growing end market) remains intact. If users were really shifting in droves from RIM to the iPhone, the Droid, and HTC, etc and the company was in the process of fading like Palm did in recent years (as many are predicting), there is no way they could have posted these kinds of numbers. Not only that, RIM guided earnings per share for the current quarter to between $1.62 sand $1.70, well above analyst estimates of $1.39.

As a result, I continue to like RIM stock, believe the company can continue to grow earnings per share, and think the market is overreacting to the competitive threat. At $47 per share, RIM is trading at 9.4x trailing earnings. Since there is very little room for the stock's P/E to contract further, I am not sure how the stock can stay this low for too much longer (barring a drop in earnings per share from here). Assuming $6 of earnings in the coming year, RIM stock could fetch $60 to $72 per share (P/E between 10x and 12x). That would represent a gain of anywhere from 28% to 53% from current levels. I even think that P/E range is on the low end of what makes sense for the company (why can't RIM trade at a market multiple?). Perhaps Microsoft will even wake up one day and finally decide to pull the trigger, buy RIM, and expand its dominance in enterprise computing.

Full Disclosure: Long RIMM at the time of writing but positions may change at any time.

Cisco Dividend Initiation Very Overhyped

I was fairly surprised how much positive press Cisco Systems (CSCO) received this week after CEO John Chambers announced that the company would likely begin paying a dividend in fiscal 2011. Market commentators acted as if this was hugely important news, not only to Cisco shareholders but market players in general. Really?

Chambers said the dividend would likely fall in the range of 1-2% per year. Considering that most other large tech companies pay meager dividends already (Microsoft, Oracle, IBM, H-P, and Qualcomm all pay ~1-2%), coupled with the fact that the S&P 500 yields a little bit above 2%, I think this announcement is both unimpressive and unimportant. I doubt Cisco shareholders are jumping for joy at the prospect of a 1.5% annual dividend (perhaps 3-4% would be a different story, as it would represent a large portion of their expected long term return) and they shouldn't be. And for the investment strategists who claim that income-oriented investors will now all of the sudden flock to Cisco shares, they are clearly overstating the situation. A dividend of 1.5% simply is not high enough to wet the appetites of income-seeking investors. In fact, a portfolio manager running a growth and income fund probably already averages a 2% yield or more in their portfolio (the average dividend for the market), so adding Cisco stock will actually lower their total portfolio's yield.

Until tech companies start paying dividends that rival those in sectors notorious for fat dividends, such as consumer staples and utilities (3-5% per year), there will be little reason for income-seeking investors to all of the sudden embrace technology stocks. Intel (INTC), with its current 3.4% dividend yield, has crossed over into that territory, but others such as Cisco have a long way to go.

Full Disclosure: Long Intel and no position in Cisco at the time of writing but positions may change at any time

Thanks to the Weak Market, Apple Stock Actually Looks Cheap

Despite my roots as a value manager, in recent weeks I have been a fairly aggressive buyer of Apple (AAPL) shares. Such an investment may not seem appropriate for a value investor but as the stock has steadily fallen, dropping below $250 per share, it has actually become quite undervalued. And not just relative to its growth rate, but the broad market as well.

Flush with $45 billion in cash and investments ($50 per share) and no debt, Apple sports an enterprise value of about $190 per share. Compare that to $15 of earnings this year and enough catalysts to make next year's estimate of $18 seem easily attainable, and you have a stock that actually trades at a discount to the S&P 500. And therein lies the core explanation for my heightened interest recently. How can Apple trade at a discount to the market after factoring in their balance sheet?

While some feel that the company's recent momentum may be fading, there appear to be plenty of catalysts left to play out over the next couple of years. The iPhone has been a runaway success, even though it still has not been released by the largest cell phone provider in the United States (Verizon). A launch by VZ, expected within the next six months, is sure to reignite the iPhone's momentum here in the States.

There are other reasons to be bullish as well. According to several press reports, the iPad seems to be catching on in the corporate world far faster than most had expected. Many companies are buying iPads instead of laptops or net books for their employees. Analysts expected most of the early growth to be consumer-related so any stronger than expected success in the corporate market will only add to the bottom line, as corporations typically go with Windows machines.

Not only that, but I continue to expect that Mac sales will continue to grow. It is true that some iPad sales could cannibalize the laptop business at Apple, but I fully expect Apple's overall share of the global PC market to continue to edge higher in coming years. The only downside is likely to be deceleration of iPod sales, but with the company having both successfully entered (cell phones) and pioneered (tablets) new markets in recent years, there is little reason to think the company will fail to continue above average growth for several years to come.

Even if management remains stubborn about allocating its $50 per share in cash in more productive ways, there is no doubt in my mind that Apple shares will once again trade at a premium to the market in the not-too-distant future. If that happens, Apple stock around $240 per share (today's price) will likely prove to be a great buy a year from now. My personal target is $300 and it does not take overly aggressive assumptions to get there.

Full Disclosure: Long shares of Apple at the time of writing, but positions may change at any time.

That Was Fast... Hewlett Packard Loses Its Luster in Three Weeks

It is always interesting how quickly the investor community can turn its back on a company. Technology giant Hewlett Packard (HPQ) has seen its support wither after its CEO Mark Hurd resigned over questionable behavior earlier this month. HP's stock has cratered nearly 20%, from above $46 to around $38 per share, and all of the sudden investors insist that HP has lost its way. The loss of Hurd is definitely a negative, but should the tables be turning on HP this dramatically already?

Fueling that argument is the news this week that HP decided to enter a bidding war with Dell over 3PAR (PAR), a small data storage company. After initially being courted by four companies, Dell and HP were the finalists to acquire 3PAR but HP had been previously unwilling to outbid Dell's $18 per share offer. However, after Dell and 3PAR announced the deal HP decided to bid $24 and try to steal it from their competitor. Sporadic behavior on HP's part? It sure seems like it, as the critics were quick to point out, but maybe HP simply had a change of heart. Maybe Mark Hurd was against a higher offer and now that he is gone, top management at HP decided they really should acquire the company. Who knows.

What we do know, however, is that HP has lost their CEO and is now willing to pay at least $1.6 billion to fill out its product line. Are these actions worth a nearly 20% hit to HP's stock price? Given that HP shares were cheap to being with, I think the sell-off is overdone, as is the bearish sentiment towards the company all of the sudden. At $38, HP stock trades at merely 8.5x fiscal 2010 earnings estimates (there are only two months left in their fiscal year, so readers need not complain that I am failing to use trailing earnings, which would make the P/E ratio 10.7). And yes, using 2011 estimates of 11% profit growth (to $5 per share), HP's forward P/E stands at just 7.7 times.

The risks here appear to be both obvious and less than dramatic. Could the absence of Mark Hurd send the company into an operational tailspin which would reduce market share and hurt profits? Possible, but unlikely. Hurd's top lieutenants remain at the company and are very likely to continue the management style and game plan he has had in place for several years.

Could overpaying for 3PAR hurt the company's finances dramatically? No chance, as HP has cash on hand of $14.7 billion.

Could Dell adding 3PAR to its arsenal materially cut into HP's business? Unlikely. 3PAR generates only about $200 million in annual sales, a drop in the bucket for a company the size of Dell ($60 billion in sales) or HP ($125 billion in sales annually).

Could the empty CEO job cost HP some customers? Unlikely. As a CTO, would you switch vendors if you have had good experiences in the past, simply because the company's previous CEO allegedly charged personal expenses to the company in what could have been an attempt to woo a female contractor? You would probably agree with me that giving him the boot should suffice.

To me it is pretty clear that HP stock is getting unfairly punished lately. As a long term value opportunity, I think it looks attractive.

Full Disclosure: Long shares of HPQ at the time of writing, but positions may change at any time.

Motorola Continues Questionable Turnaround Strategy

Despite heavy competition that seems to get more fierce by the day, Motorola took another step Monday to increase their exposure to the mobile phone market. In order to raise the cash needed to reinvest in their mobile device division, which made up 32% of overall company revenue in 2009, Motorola is selling a large piece of its network equipment division to Nokia Siemens Networks for $1.2 billion in cash. The assets, which account for 17% of revenue, will add about $0.50 per share in cash to the company's coffers and boost the mobile device business ($7 billion annually) to 39% of company sales, as total sales will drop from $22 billion to about $18 billion after the divestiture.

I continue to find this turnaround strategy less than exciting from an investor standpoint. Motorola is essentially divesting itself of a slower growth business despite a strong market position and stable cash flow in an effort to reduce the diversity of the company's business lines. If the mobile device market was not so competitive, Motorola had a better leadership position already, and/or the profit margins on cell phones were higher than its other divisions, I might think such a move was smart. However, we have seen how difficult it is to make a lot of money selling mobile phones. In order for this transformation to work for investors, Motorola has to somehow figure out a way to steal consumer subscribers from Apple and corporate customers from RIM, which seems like a very difficult task (not to mention strong second tier players such as HTC, Samsung, LG, and perhaps HP/Palm).

From an investment perspective, buyers of Motorola today have to want to get exposure to their mobile business (think Droid, etc). While their new products in this space are undoubtedly pretty solid offerings, without significant market share gains in the market going forward, I do not see Motorola really boosting their underlying profitability with this turnaround plan. Not only that, but with plans to split the company up into two pieces early next year (mobile devices/home and enterprise), Motorola is going to live and die by the mobile business even more as time goes on.

Meanwhile, the company does not appear to be getting top dollar for their other businesses. This latest deal has them giving up 17% of their company's sales in return for about 50 cents per share in cash (which is only about 6% of their market value). At that rate, the entire company would only be worth about $3 per share (the stock spiked up to around $8 yesterday on the news of the sale).

Now, the company would make the argument that the networks business they are selling was a drag on their valuation (as the least desirable part of their company), but the numbers seem to tell another story. Motorola had previously contemplated selling their entire home and networks business (~$10 billion in sales) for between $4 and $5 billion. They abandoned that plan and sold only the wireless network part ($3.7 billion in sales) for $1.2 billion, due in part to a lack of interest at the price they were asking.

All in all, with a market value of $18 billion Motorola better figure out a way to turn their mobile phone business into a consistent money maker, as the company is selling off a lot of their profitable divisions to focus on the one business line that is losing money. Based on how the mobile phone market has played out in the last few years, Motorola has a tall task ahead of them, and shareholders should be wary.

Full Disclosure: Long Apple and RIM, and no position in MOT, at the time of writing, but positions may change at any time.