Last week Motorola Mobility (NYSE:MMI) announced mixed third quarter results with mobile phones sales increasing to 11.5 million in Q3 compared to 9.1 million that it sold in the same quarter last year, but its tablets sales were disappointing. It sold a mere 100,000 Xoom tablets, which is evidence that Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) are eating its lunch in the tablet market.
A few days back, MMI announced that it has again lowered the entry price for its Xoom tablet and rolling out a new “family edition” that will sell for $379. We believe that lowering the price of the tablet will not make much difference to Motorola as the competition in the lower end of the tablet market is equally fierce. Amazon introduced the 7-inch Kindle Fire tablet last month for a throw-away price of $199, while Research in Motion (NASDAQ:RIMM) also slashed its PlayBook tablet price by $200 to $299. This is something we discussed in our earlier note titled Motorola Mobility Reduces Xoom Prices, So What.
See our complete analysis for Motorola Mobility stock here
Motorola’s mobile phone sales were better than expected, but it could only sell 4.8 million smartphones. Its smartphone segment is an important one for Motorola as it will help the company improve its margins. Last week we discussed that Motorola and Verizon (NYSE:VZ) launched DROID RAZR smartphone, which Motorola claims to be the world’s thinnest 4G LTE smartphone (see Motorola Mobility Droid RAZR & Earnings in Focus). The Droid Razr has some attractive features and looks to be a strong contender in the smartphone market, but it is too early to say if it can boost Motorola’s smartphone sales in the next quarter.
Google (NASDAQ:GOOG) bid to acquire Motorola Mobility in August this year for a valuation of $12.5 billion, which was a whopping premium of 60%. Until this acquisition is completed, Motorola Mobility will continue to function as an independent company and reported earnings this morning.
Our pre-deal price estimate of $21 for Motorola Mobility stock is about 45% below market price.
Understand How a Company’s Products Impact its Stock Price at Trefis
