Motorola Droid

Recent history has shown us that Motorola (NYSE: MOT) has been a laggard. Bad acquisitions and weak product lines have kept the stock in the single digits since 2008. Now it seems the sentiment is changing. The Schaumberg, Illinois based company is now viewed by some as extremely cheap. Some experts feel Motorola has a breakup/sum of parts value of at least $9. The company also has a whopping $3.60 per share in cash. Not too shabby for an $8 stock. These fundamentals are different from what you normally see in low priced stocks.

Co-CEO Sanjay Jha has made the company relevant again not only to Wall St. , but to smart phone buyers as well. In June for instance, Motorola’s sales were so strong that they couldn’t even meet the demand for the Droid. The success of the cellphone unit will possibly be highlighted even more if Motorola actually goes through with it’s spin off of the cell phone unit, Motorola Mobility. Motorola’s $1.2 billion sale of it’s wireless networking unit to Siemens seems to be the final piece of the breakup puzzle.

There are skeptics too. Many ask whether the Droid can compete with the iPhone or Blackberry. Many still view Motorola as dead money despite the recent developments and the pressure of billionaire investor, Carl Ichan, on management to unlock shareholder value. Ichan currently has a stake of just under 9% in shares of MOT, which are currently at a loss similar to a penny stock trade gone bad. Certainly not something you would expect out of one of the greatest stake buyers in Wall St. history.

Now is the time to watch the news closely on MOT. The anticipation of the tax free spinoff to shareholders may drive buyers in before the record date. Also watch for asset sales and Droid sales relative to the iPhone. These are all potential catalysts. While buying shares of MOT is less risky than buying shares in hot penny stocks, trading rules still apply. Always use a stop loss, scale out of the trade if you are profitable and always save some liquidity for other ideas.

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