Monday, December 19, 2005

Thin is In: 2005 was Moto's Year

Midwesterners do know fashion.

Wireless handset maker Motorola (MOT) is back on track and CEO Ed Zander's picture should emblazon every corner of Wall Street this Christmas.

Shares of Illinois-based Motorola are up 60% since "turnaround artist" Zander took the helm at the world's third largest cell phone maker.

If you think sleek electronic gadgetry in and of itself will drive bottom line growth and higher market share, think again.

Strong armies (namely, Moto's phalanx of hyperdiligent engineers) need strong leaders.

Of course, the Oklahoma land rush for Motorola's ultra-thin razR phone (made of aircraft-grade aluminum) is what awoke Motorola from its coma, but the Motorola story is ultimately an Ed Zander story.

Zander's the reason Motorola went from a being an on-the-defensive laggard to a larger-than-life force that's simultaneously got cell phone aficionados salivating for the next Motorola product launch and rival Nokia (NOK) shaking in its Swedish boots.

The bears think that Motorola could soon face the pangs of commoditization and that shares of are richly valued.

We think not.

Trading at less than 2 X sales and just 14 X earnings (industry trades at 25 X current EPS), Motorola still holds an attractive valuation.

More importantly, in an exclusive interview on The Wall Street Journal Report this weekend, Zander spoke ebulliently of "big growth over the next year in China and other emerging geographies."

If he delivers, as he did in all of 2005, we see shares of Motorola easily breaking $30 in 2006.

In a world where fashion and cellular technology are indistinguishable, Moto's king.

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