It is very old news that Motorola’s handset business is broken, and, with competitors like Samsung, may never fully recover. In the June quarter, revenue for that business fell from over $7.1 billion last year to less than $4.3 billion. Segment operating income fell from an $804 million profit to a $332 million loss.
But, the company’s enterprise and network businesses did fine. Revenue in the two divisions hit $4.5 billion, up from $3.7 billion last year. Operating income rose to $494 million from $461 million. In other words, these businesses carried the company.
Wall St. spends most of its focus on Motorola trying to figure out how it will fix its handset business. But, the near-term alternative is to make its enterprise businesses larger.
Nortel (NT), which is not peach of a company, was a breakeven operation on just over $5 billion in revenue during the first six months of 2007. Management has sucked a lot of costs out of the business, but its lack of operating margin has pushed the stock from a 52-week high of $31.79 to $18. The company’s market cap is now under $8 billion. Motorola could pay cash for it.
Nortel’s carrier networks devision, its largest, is profitable. To make money on its other units would require cost cuts. Or, the would have to be sold. But, either way, making Nortel more profitable is a reasonable possibility, especially if Motorola pulled out management and redundant costs.
Motorola could increase the size of its enterprise businesses by 50% by acquiring Nortel, and its could build the area where it has a chance of continuing to make money. Maybe Samsung would buy the MOT handset operation.
Douglas A. McIntyre
Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)
Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.
Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.
Click here now to get started.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.