We published a Motorola positioning document and company analysis back in February (available here) that outlined how Motorola might establish some improved momentum and gain a better multiple in the market to drive the stock towards $20.  Even absent a bold strategy, the valuation of the company post-split is likely to be in the $11-12 range.

Our analysis was mostly greeted by a giant yawn of mildly disgusted indifference. Motorola had been disappointing long enough (most would point to the RAZR in 1993 as their last real innovation) to be no longer worth paying attention to. The situation reminds me very much of the time that a company called Sterling Software (trading under the symbol SSW at the time) acquired the TI software business. Back then, my view of the acquired business was that in the next 12 months SSW stock was likely to double as investors learned how much revenue and earnings the acquired business would add. (SSW did indeed go on to double that year but was still a failure for me as a sell-side analyst because I failed to get clients to put it into their portfolios.)

Adding to the difficulty of getting anyone interested has been the lack of a clear point in time when the shares might start to outperform. In fact, the shares have been “dead money” so far this year. But things are perking up with continued success in the Android market and the realization that the split may be a positive catalyst.

To that end, the sale of their wireless network business to Nokia Siemens for $1.2B in cash is a clear positive.  The value is more or less in-line with our $1.8B intrinsic valuation for this business since MOT is retaining the patent portfolio, some receivables and the iDEN business. As described in our note, the Networks business was seen as “the best candidate [business] to eliminate,” and so it comes as some relief that a solution was found. The transaction is expected to be finalized before year-end, paving the way for the complete split of the company at the beginning of 2011.

We are mostly attracted to what will be the mobile computing segment of the company that will include both the Mobile and Home businesses.  We’ve made no secret about our preference for mobile and consumer Internet technology investments (as in “Time to Pull the Trigger“, June 2008) and see the combination of mobile and home-based Internet technology as a sensible way to address the consumer market.  Although the smartphone is the central feature of mobile Internet, consumers wish to take advantage of other networked devices in their home, and even in their cars, to extend the power and richness of their connected world.

The earnings report today demonstrates at least respectable execution which is all the company needs to begin to win investors over again.  In our view, the success of Android is producing a powerful tailwind for the Motorola mobile business that will improve the fundamentals sequentially for the next several quarters.

As the split gets closer we will do our IV analysis for the two companies but fully expect the shares to be in double digits in the next 6 months.  While not spectacular, this is a very attractive return from current levels in a very liquid security.  If the company were to execute well the equity value could easily top $20.

So here we have another stock that looks poised to double in the next 6 to 12 months. Apple is far more sexy (and we own that one too) but based on our IV there is more upside today in MOT.

Our overall IV analysis, as well as that of the individual business segments, is available to R2 subscribers.

[Disclosure: The R2 Model Portfolio has a long position in MOT and so does the author at the time of this writing. Positions are subject to change anytime and without notice. This post should not be considered investment advice.]

I say this mostly because of the Apple “iSlate” which is supposed to be announced later this month and ship in March. (Even if this isn’t true it might still have the same market freezing effect.)

At this point most of the other platforms have disclosed what they have to offer in the near term. The Google Nexus One is out. A bunch of new eReaders are all out. The Windows version of the tablet computer is out. There is a laundry list of new technology gadgets rolling out CES as we write that will include many new netbook and laptop option from basically every vendor.

But now it feels like we will enter the eye of the hurricane of mobile Internet for the next month or two as all eyes turn to Apple and the “iSlate” or whatever it will be called.

There is an obvious gap in the market that Apple may be able to exploit. The iPhone and similar devices are too small to be good choices for doing lots of reading on. As nice as an eReader might be it’s hard to justify a separate device for it. It certainly feels like a feature that should be built into a device that does more than just support reading.

Obviously many of us simply use our laptops for reading most online content but the form factor is not ideal for casual consumption in the living room, kitchen or the hammock. As reading online expands to represent a few hours a day it’s easier to justify a separate device for it. A tablet style device is perfect for many of these use cases but not if one has to navigate a typical OS environment to use it.

It would seem silly to buy an eReader in Q1. The same might be said regarding a new smart phone although buying a Droid, Nexus One or iPhone isn’t going to cause any acute pain or suffering.

Personally I think Apple might have a hit on their hands if they do the iSlate right. The most critical aspect will be how supported it is by players like Amazon. If Apple and Amazon can work together here it will be huge for both.

However if Apple comes out with a fantastic device but isolated from Amazon and most content then it’s not going to be very compelling.

I’m freezing my technology budget until April/May and then will make some new purchases for myself and the company.

The first quarter is always seasonally weak so it will be hard to tell what magnitude this may have in terms of near-term business trends. But if Apple successfully stalls the market in Q1 it could create some disappointments in Q1 and some opportunistic portfolio adjustments. We can only watch and be ready.

What are you going to do?

[Disclosure: Apple Computer is in the Research 2.0 model portfolio.]

Investors have clearly been voting with their feet when it comes to the battle for the Mobile Internet between Apple and Research in Motion (RIM). This comes at a time when it’s become crystal clear to all (including them) that Microsoft desperately needs a strong play in mobile but is too far behind to catch up without a major acquisition.

Put simply RIM is suffering from negative investor sentiment. Not only is it coming from Apple in the form of the iPhone but also in the shape of software and services under the Android umbrella from Google. Motorola appears more competitive thanks to Android. To add insult to injury people are starting to take Nokia more seriously in the space based on more claims by senior management about what’s coming in the future. (This from a company who for the first 16 months of board-level reporting had grouped “smart phones” into the “design and fashion” category instead of full-featured data!)

Based on Intrinsic Value (IV) RIM is the most undervalued company in the mobile space right now. And that’s factoring in all the present investor fears of slowing growth and lower margins for the next few years, almost dialing in a worst-case scenario. We admit that it doesn’t make RIM “cheap” as an acquisition but it does begin to make it look reasonable and potentially non-dilutive for Microsoft to consider.

The fact is Microsoft *NEEDS* more than just a strategy and technology, they need a footprint. The choices are few but Microsoft is large enough to buy any of them including Nokia. But Microsoft doesn’t need to be in the cell phone business the need to be in the mobile Internet space which is the world of the iPhone, Blackberry and Android class of device. Palm has some good technology but doesn’t come with a footprint, especially in the enterprise. Motorola has too much baggage in non-phone businesses and what they do have is now based on Android.

Boiling it down to price is the hard part. On current numbers RIM is trading at a bit over 1x 2015 revenues. But the market will look at current revenues and there will have to be an acquisition premium of at least 20%. That would translate into a P/S ratio of around 4x and result in some near-term punishment for MSFT stock and investors focus in on near term dilution.

Strategically however this would be a masterful stroke for Microsoft. Almost no matter what Windows 7 Mobile looks like it will appear too late in the game to gather any meaningful share and attention. Mobile is too important to settle for that as the best outcome.

Of course RIM doesn’t need Microsoft to make their business work or for the stock to reach our IV estimates. But there is no question that the company needs to continue to execute well. RIM has advantages in both the enterprise and the consumer space that can be used to fend off Apple and Google but they are going to need to protect and extend these in order to win.

In addition we’d expect other large firms like HP and IBM are now appreciating the almost overwhelming importance of mobile and both companies know RIM well and would be able to acquire the company fairly easily.

[Disclosure: The Research 2.0 model portfolio has positions RIMM, AAPL and MOT.]

Thanks to Google this week already started off with a focus on the real-time web, based on mobility and new devices with sensors, cameras, microphones, HD displays and speakers.   On Monday Google presented a slew of new features and technologies aimed at improving search by location, by voice, and by sight.   When combined with enhanced real-time search, one that includes a variety of content from sources like twitter, location-aware applications and fixed search content, the real-time web becomes a much richer experience than what we have known so far with things like IM and SMS.

Tomorrow and Thursday we will be attending Le Web 2009 in Paris who has chosen “real time web” as the theme.  As with all Le Web events there is a fairly diverse range of content across three different programs but the usual suspects (Twitter, Google, Facebook) will all be in attendance and elaborating on real-time as the latest “mode” of web development.

We wouldn’t put “real-time” as a true facet of technology as it relates to our work.  Latency has been a key factor in technology usage for thirty years.  We did include an analysis of this and other features for what we view as the ultimate Internet architecture in our February 2007 research monthly (pdf).  IBM funded many studies that demonstrated the dramatic increases in productivity and value that came from “sub-second respond time” as we called it back then.  As with many things on the web and in the cloud old things are new again.  What’s new now is the ability to deliver instant responses across applications, networks, distances and devices.

What’s so powerful about this notion today is the richness that can be brought into the realm of real-time use: People, places, things, and all related information in one place and current to within a few seconds ago.  As we’ve written before the initial oohs and aahs of insight will be coming from so-called augmented reality and real-time social networking applications on the iPhone and the like.

From an investment standpoint we continue to focus on the mobile segment of this space with companies like Apple, Google, Research in Motion and Motorola being the ones to own.  Based on our IV work it seems that Research in Motion has the most near-term upside here.  RIM is also too strategic to not be acquired by someone like Microsoft, HP, or IBM.

More broadly we know that cloud-based GPU computing is already in early deployment which will add yet another growth story for both Nvidia and AMD.

If it feels like just the beginning it’s because it is.  There are many more related themes to this trend as it develops ranging from wired and wireless bandwidth, content, devices, cloud services and infrastructure, new software infrastructure and on and on.

Thanks to the exponential pace of technological advance and our linear perceptions, we know that many of these advances will seem to happen “all of a sudden” in the next few years.

For more information on the Google Search briefing there is a summary here on TechCrunch.  More information on the Le Web 2009 program can be found on the Le Web event website. The events on Wednesday and Thursday are supposed to be available via webcast.

[Disclosure: Research 2.0 has model portfolio positions in Google, Apple, Research in Motion and Nvidia.]