Motorola Mobility Holdings Inc. (MMI), reported disappointing financial results for the third quarter of 2011, with both its top and bottom line missing the Zacks Consensus Estimate.
Motorola Mobility continues to expand its 4G-based smartphone and tablet portfolio with the launch of popular devices like the DROID RAZR and DEFY + smartphones. Moreover, the launch of two new Android 3.2 based XYBOARD tablets during this holiday season will further bolster its tablet sales as the company is loosing tablet market share.
Motorola Mobility continues to face stiff competition from other cheap smartphone makers. However, during this quarter, the company showed improved performance in smartphone sales with 4.8 million handsets being sold compared with 3.8 million handsets in the prior-year quarter. Despite such performance, we expect smartphone sales to shrink in the upcoming quarter as newly launched iPhone 4S continue to create huge demand globally.
Earlier, Google Inc. (GOOG) entered into an agreement to acquire Motorola Mobility for $12.5 billion, subject to regulatory approvals. Presently, Motorola Mobility has the capacity to hold approximately 24000 patents, which Google is mainly eyeing.
Moreover, the company is one of the leaders in the set-top box category, which makes it another lucrative opportunity for Google as the latter is aggressively rolling out the next generation smart TV option called GoogleTV.
Recently, Motorola Mobility achieved shareholders approval regarding its agreement with Google. We expect the deal to be completed by the first half of 2012. Therefore, it remains to be seen how other Android users react, once the deal is completed. Till then, we prefer to remain on the sidelines.
We, thus, maintain our long-term Neutral recommendation on Motorola Mobility Holdings Inc. Currently, Motorola Mobility Holdings Inc. has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
