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July 24, 2006

Confident Motorola Sharply Increases Share Buyback

Apparently, Motorola (MOT) believes its stock price is too cheap. The company just announced that it will complete its prior $4 billion, three year repurchase plan 2 years ahead of schedule by immediately buying $1.2 billion in shares. Additionally, a new $4.5 billion, 3 year repurchase has been approved by the Board. According to the press release, the new plan represents 9% of current shares outstanding.

MOT has $10.1 billion of net cash on its balance sheet representing cash and equivalents of $14.4 billion and debt of $4.3 billion. Even after the repurchase, the company has plenty of firepower to complete a large acquisition, so by itself the latest announcement won’t eliminate the risk of a major deal.

Look for additional announcements out of MOT today and tomorrow in conjunction with the company’s annual analyst meeting. At the meeting, analysts will be looking for new products and an update on potential margin expansion in the handset business.

Northlake remains long MOT, looking for mid-$20’s price to exit the position.

Posted by Steve Birenberg at July 24, 2006 08:51 AM in MOT