Motorola Inc. (NYSE: MOT) may perhaps be the longest turnaround story of the modern era in technology and communications.  For about 15 years it has laid off workers, restructured operations, distributed units, and made acquisitions here and there.  Besides this upcoming break-up of the company, the company has three newer issues that are driving the shares outside of the longer-term plan to break the company up.  Motorola is becoming one of the larger special situation stocks of 2010 with an appeal to value investors and special situation investors alike.

The first is a direct float limitation instance.  Billionaire financier and activist Carl Icahn raised his stake to 9.99% from a prior 8.75%.  This keeps Icahn under a 10% ownership rule by the SEC and keeps Icahn from being considered a true business insider.  Can Icahn lift that stake?  Sure.  He can go over that and then some, as he has in other companies before.

The second issue is a look-back that ties in Google Inc. (NASDAQ: GOOG) via the Droid phone for second quarter sales.  NPD recently released data showing that Motorola’s Droid phone was the best-selling Android phone in the U.S.  It has been quite some time that any “Hello Moto” variation has led in any selling category.  The most recent quarterly report last week said that some 2.7 million smartphones were shipped in the second quarter, although that figure combines all smartphone sales from the company.

The third driving force is that Apple Inc. (NASDAQ: AAPL) and its iPad have created a new market for the PC sector via tablets, or tablet PCs as they will be called after more competition comes into play.  Reports from multiple sources in the last 24 hours have put Motorola as the winner for a tablet device that would allow TV tied to Verizon’s FiOS digital television service.

The largest longer-term and ongoing issue is the current spin-off or break-up plans that are expected to take place in early 2011.  This may end up being perhaps one of he greatest special situations for investors in years.  With an $18.8 billion market cap, a recent wireless-network equipment unit sale for some $1.2 billion makes the balance sheet analysis a bit uncertain versus the operations of the company on an apples-to-apples basis.  Motorola’s pre-earnings data had around $9 billion in liquidity in just the cash, cash equivalents, and longer-term investments.  The most recent earnings from last week noted a total cash position of $8.3 billion.

The real value ultimately depends upon whom you ask and over what time period you look at.  The overall company is back to posting profits and current estimates from Thomson Reuters are $0.41 EPS for 2010 and $0.55 EPS for 2011.  Those estimates are extremely varied from firm to firm.  We are always one of the first to point out that “consensus” in any restructuring or special situation should be treated with the same certainty as a beginner’s dart throwing tournament.

The average price target on a mean basis from analysts is roughly $8.80, implying only about 9% upside from the current share price after a huge gain today.  Motorola shares are up over 6% at $8.09 versus a 52-week trading range of $6.04 to $9.45.

We’ll believe the break-up is complete when we formally see it happen.  After 15 years of promises and issues, there is no reason to just grant trust here.  Still, Motorola still looks like it is in the process of becoming one of the larger special situations opportunities of 2010.

JON C. OGG

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