Motorola Solutions, Inc. (MSI)

[SeriousMoney]

MOTorola moving into WiMAX bigtime!

Investing In A WiMax Future
<Steve Kichen, Forbes.com, 10.26.05>

Hype and fear always accompany newfangled technologies. Both now swirl around WiMax, a wireless broadband standard that could either change the way that people access the Internet or get left in the dust by competing wireless technologies. Careful stock pickers can hedge their bets by getting their WiMax exposure with a handful of tech blue chips.

A WiMax refresher: The term refers to a group of standards designated 802.16 by the Institute of Electrical and Electronics Engineers Standards Association. Think of WiMax as a supercharged version of Wi-Fi, today's set of specifications for wireless local area networks. Wi-Fi is a low-powered service with a maximum range of just 100 to 300 feet, while WiMax can cover much more distance. In its high-powered guise, WiMax can reach 19 miles of rural area and several miles of dense urban environments. (WiMax will be available in both high- and low-powered configurations.)

The heaviest WiMax usage is likely to be by subscribers paying for high-powered service in a licensed portion of the radio spectrum. According to a forecast from Boston research and consulting outfit Strategy Analytics, WiMax installations could reach 20 million worldwide by 2009.

If you buy the growth numbers, you could try a company like Israel's Alvarion (nasdaq: ALVR - news - people ). The company has been a WiMax pioneer, spends 14% of its revenue on research and development and has enjoyed 26% annualized sales growth over the past five years. But so far Alvarion has only recorded two years of profit in its ten-year history, and its shares are expensive. Even after a 43% tumble in price year-to-date, Alvarion shares go 95-times projected earnings for fiscal 2006.

A better WiMax strategy is to go for a more familiar--and cheaper--names. Intel (nasdaq: INTC - news - people ), for example, has a handle on the new technology and has the market clout to get its WiMax silicon into devices, such as laptops and handheld computers, though power consumption requirements may limit WiMax proliferation in the smallest handheld devices. Better still, its shares trade at only 14-times estimated 2006 profits, which is a five-year low multiple for expected earnings for the coming year. Over the next three to five years, analysts reporting to Thomson First Call expect Intel to generate annualized earnings growth of 17%.

Another biggie moving into WiMax is Motorola (nyse: MOT - news - people ). The company has been a member of the WiMax forum, a trade association of hardware and software vendors, since 2004. The company also looks reasonably priced. It currently has an enterprise multiple of 7.3 versus a five-year average of 17.3. The enterprise multiple is calculated by dividing enterprise value (market value plus net debt) by operating income (earnings before interest, taxes and depreciation). Enterprise value is a rough calculation of what it would cost an acquirer to purchase a company. Similarly, the enterprise multiple shows how many years it would take to pay back the purchase price.

The big telecommunications companies are all working on WiMax strategies. Philip Kendall, director global wireless practice at Strategy Analytics, thinks that Sprint Nextel (nyse: S - news - people ) is well-positioned to exploit WiMax. “It has licensed spectrum for 75% to 80% of the U.S. population,” he says.


Unwired To The Max
Company Country Closing Price Year-To-Date % Change In Price Three-Year Growth In Sales Per Share Estimated 2006 EPS Market Value ($mil)
ADC Telecommunications (nasdaq: ADCT - news - people ) US 18.42 -2 -31 1.04 2,144
Airspan Networks (nasdaq: AIRN - news - people ) US 5.03 -7 33 0.09 197
Alvarion (nasdaq: ALVR - news - people ) Israel 7.58 -43 15 0.08 443
BT Group (nyse: BT - news - people )* UK 36.55 -8 -4 3.64 30,962
Intel (nasdaq: INTC - news - people ) US 23.11 -1 11 1.61 140,093
KT (nyse: KTC - news - people )* S Korea 21.40 -2 17 2.38 12,192
Motorola (nyse: MOT - news - people ) US 20.94 22 3 1.25 51,944
Nokia (nyse: NOK - news - people )* Finland 16.29 4 -1 1.10 72,226
Nortel Networks (nyse: NT - news - people ) Canada 3.39 -2 -27 0.18 14,690
Novatel Wireless (nasdaq: NVTL - news - people ) US 11.97 -38 -28 0.64 349
Sprint Nextel (nyse: S - news - people ) US 23.65 -5 1 1.59 35,142
YDI Wireless (nasdaq: YDIW - news - people ) US 2.40 -59 -8 NA 51

Prices as of Oct. 25. EPS: Earnings per share. NA: Not available. *Trades in U.S. as ADR or ADS. Sources: FT Interactive Data, Thomson IBES and Reuters Fundamentals via FactSet Research Systems

http://www.forbes.com/strategies/2005/10/25/wimax-stock-focus-investing-cz_sk_1026sf.html?partner=ya....