We’ve had a focused Mobile Internet theme for the last two years or so and the initial focus has been on Apple, Research in Motion, Google and even Palm as a “special situation.” Needless to say these stocks and this theme have been on center stage for some time.
After looking at the first new products from Motorola based on Android we have officially put them on the list. Motorola is a major global player despite stumbling very badly in the years since they introduced the hit Razr phone. (We still have one for pre-paid cards in strange places and it remains an excellent phone even by modern standards.)
After bringing in a new CEO to focus on the phone business and build it on top of the Google Android platform it appears that Motorola has not bumbled this time. The value-added software makes the mobile device a powerful networking and communication tool which is what it has become in the last year.
Although being on Android can “cut both ways” in terms of value-add versus commoditization, it’s far better than trying to build on a niche OS. This is where Palm is at a major disadvantage with WebOS and Research In Motion may find themselves in a similar state if Android and Apple come to dominate the mobile Internet OS.
The one thing we can say for Motorola is that they have proven that they at least understand what is going on in the modern world of the mobile Internet and have demonstrated some execution around that vision. This is far more than we can say for Nokia who so far appears clueless about what is going on despite the success of devices like the iPhone and the Blackberry.
From a stock standpoint Motorola is also much more interesting than the others at these levels. Apple, Research in Motion and Palm have all had very nice runs and trade at fairly high multiples. At this point few doubt the industry positions of Apple and Research in Motion and those stocks trade at levels with that expectation baked in. Although Motorola has moved up of late they still have much to prove and the stock has a way to go before one would say that a leading market position has been factored into the shares.
We would avoid Palm for now. The current price reflects our estimate of True Value and with increasing competition the ability for Palm to produce more upside surprises may be difficult. The fact that there are already so many shares of Palm sold short may be the one thing that keeps the shares from going down if things don’t continue to improve for them.
The glimpse Motorola is giving into their mobile Internet plan is very positive and if they can continue to execute on it the shares remain a bargain. We’re working on a True Value for MOT shares which will help us decide how to position it in the portfolio over time.
[Disclosure: At the time of this writing Research 2.0 owns shares of Motorola.]
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