Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
23
Using Actual Financial Accounting
Information To Conduct Financial Ratio
Analysis: The Case Of Motorola
Henry W. Collier, University of Wollongong, Australia
Timothy Grai, Oakland University, USA
Steve Haslitt, Oakland University, USA
Carl B. McGowan, Jr., Norfolk State University, USA
ABSTRACT
In this paper, we demonstrate the use of actual financial data for financial ratio analysis. We
construct a financial and industry analysis for Motorola Corporation. The objective is to show
students exactly how to compute ratios for an actual company. This paper demonstrates the
difficulties in applying the principles of financial ratio analysis when the data are not
homogeneous, as is the case in textbook examples. We use Motorola as an example because the
firm has several segments, two of which account for the majority of sales and represent two
industries (semi-conductor and communications) that have different characteristics. The case
illustrates the complexity of financial analysis.
Keywords: Ratio Analysis, Industry Analysis, Financial Accounting Information
INTRODUCTION
Motorola Segment Analysis
otorola is a global manufacturer of communication products, semiconductors, and embedded electronic
solutions. The company is divided into six operating segments that publicly report financial results.
Financial data are provided in Appendix A. The Personal Communication Segment (PCS) designs,
manufactures, and markets wireless communication products for service subscribers. Products include wireless
handsets, personal 2-way radios, and messaging devices, along with the associated accessories. The Personal
Communication Segment accounted for 37.8% of 2002 sales, making it the largest of Motorola’s operating
segments. The Global Telecommunications Segment (GTS) designs, manufactures, and markets the infrastructure
communication systems purchased by telecommunication service providers. Products include electronic exchanges,
telephone switches, and base station controllers for various wireless communication standards. This segment
accounted for 15.8% of Motorola’s sales in 2002. The Broadband Communication Segment (BCS) designs,
manufactures, and markets a variety of products to support the cable and broadcast television and telephony
industries in delivering high speed data, including cable modems, Internet-based telephones, set-top terminals, and
digital satellite television systems. This segment accounted for 7.3% of Motorola’s sales in 2002. The Commercial,
Government, & Industrial Segment (CGIS) designs, manufactures, and markets integrated communication systems
for commercial, government, and industrial applications, typically private 2-way wireless networks for voice and
data transmissions, such as would be used by public safety authorities in a community. This segment accounted for
13% of Motorola’s sales in 2002. The Semiconductor Product Segment (SPS) designs, manufactures, and markets
microprocessors and related semiconductors for use in various end products, such as computers, wireless and
broadband devices, automobiles, and other consumer electronic devices. Some of the semiconductors produced are
used in products marketed by other Motorola segments. This segment accounted for 16.8% of Motorola’s sales in
2002. The Integrated Electronic Systems Segment (IESS) designs, manufactures, and markets automotive and
industrial electronic systems, single board computer systems, and energy storage products to support portable
electronic devices (such as wireless handsets). This segment accounted for 7.6% of Motorola’s sales in 2002.
M
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
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Total Motorola sales and profitability have varied widely over the last five years, as shown in Table 1.
Sales peaked at over $37B in 2000 and dropped to less than $27B in 2002. Motorola had a net loss in 2001 and
2002. Motorola’s stock price has varied from a high of over $55 in February of 2000 to a low price of less than $8
in January of 2003. Despite the losses incurred recently and the variability of reported income, Motorola has
continued to pay a steady dividend of $0.16 per share since 1997. This is a clear indication of the importance that
Motorola attaches to the informational content associated with dividends; despite significant losses, dividends have
not been reduced. The most recent data indicates that Motorola has returned to profitability, posting a $0.01 per
share profit for the first quarter of 2003.
Table 1: Condensed Statement of Financial Performance 1998 to 2002
2002
2001
2000
1999
1998
Sales
26,679
30,004
37,580
33,075
31,340
Net Earnings
(2,485)
(3,937)
1,318
891
(907)
Note: All figures in millions except per share data, as is typical in this report, unless noted.
Industry Analysis
The Telecommunications Equipment Industry
The telecommunications equipment industry provides the products required to support land-based and
wireless communications, both the end-consumer equipment and the infrastructure of the networks that enable the
end-consumer products. Data for companies in the telecommunications industry are shown in Appendix B. Nokia
is the market leader in the handset portion of this industry, followed by Motorola, Siemens and Sony-Ericsson.
Ericsson leads the infrastructure portion of the equipment industry. The five largest companies are Cisco Systems,
Nokia, Qualcomm, Motorola, and Ericsson (yahoo.marketguide.com).
The telecommunications equipment industry, in particular, has seen difficult operating conditions among
the technology industries over the last several years. The difficult operating conditions are the result of two
underlying issues. First, after a rapid build-up of wireless network infrastructure by the service providers (firms
such as Verizon Wireless that provide telecommunication services to the end-consumer) in 2000, the demand for
equipment by the service providers dropped some 15% in 2001 and likely dropped by even a higher percentage in
2002 (Yahoo.finance). Second, the demand for third generation (3G) wireless technologies (which includes mobile
data services that can combine voice, data, email, PDA, and other features) has not evolved as quickly as expected.
Wireless subscribers have chosen not to replace their handsets with the new 3G technologies in anticipation of the
price of the equipment dropping (Yahoo.finance).
The telecommunication equipment industry has a beta coefficient of 2.09, explaining, in part, the difficult
operating conditions in the industry as a magnification of the poor conditions in the economy as a whole
(yahoo.marketguide.com). A key segment within the telecommunications industry is the wireless handset (cellular
phone) segment, both because of its size and because of its visibility to end-consumers. In this wireless handset
segment, Nokia is the clear market leader, with a substantial 35.8% market share in 2002 and a strong presence in
the critical European market. This is important because Europe is where much of the technological innovation in the
industry occurs. Motorola is in second place in this industry segment with a market share of 15.3%, less than half of
Nokia’s share. Third place belongs to Samsung, with a 9.8% market share, but Samsung’s strong technology and
significant resources pose significant challenges to Motorola and Nokia’s leadership positions. Siemens held an
8.4% market share in 2002, while the joint venture between Sony and Ericsson held a 5.5% market share in the
industry segment (Reiter, 2003).
The Semiconductor Industry
The semiconductor industry provides the semiconductor “chips”, which are integral to consumer
electronics, such as PC’s, PDA’s, audio, visual and entertainment equipment, and cellular phones. Data for
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
25
companies in the semiconductor industry are shown in Appendix C. These chips are also used in commercial
electronics, such as network servers, communication switch equipment, and industrial controls. Intel is the largest
firm in the industry. Intel is known, in particular, for supplying the microprocessors used in PC’s. The top five
companies in this industry, in order of descending market capitalization, are Intel, Texas Instrument, Taiwan
Semiconductor, Advanced Materials, and ST-Microelectronics (yahoo.marketguide.com).
The semiconductor industry experienced a record year in 2000 with worldwide sales of $200B. Sales
experienced a significant declined in 2001, down some 30% to $140B. The decline in 2001 was attributed to weak
sales in nearly every consumer electronics segment and to weak sales in commercial electronic segments, resulting
in low demand for semiconductors (yahoo.finance). The year 2002 brought only a slight recovery in the
semiconductor industry, with an expected worldwide sales increase likely to be only several percentage points
higher than 2001 levels. November 2002 sales only increased by 1.3%, less than the 1.8% increase in October 2002.
This low increase is significant because November sales have historically averaged larger increases as electronic
manufacturers prepare for the holiday season (Value Line, January 17, 2003, p 1051). The semiconductor industry
has a Beta coefficient of 2.17, which, like the telecommunication equipment industry, explains, in part, the severe
downturn in the industry as the entire economy took a downturn over the last several years
(yahoo.marketguide.com).
Financial Ratio Analysis
Financial ratios for Motorola, for the semiconductor industry, and for the telecommunications industry are
provided in Table 2. The firms in the semiconductor industry subset represent 87% of the estimated total
semiconductor industry sales of $100 billion in 2002 (Value Line, January 3, 2003, pp. 744 and pp. 770). The firm’s
telecommunications equipment industry represented 91% of telecommunication equipment industry sales of $277
billion in 2002 (Value Line, January 17, 2003, p 1051).
Table 2: 2002 Ratio Analysis
Motorola
Semiconductor
Industry
Telecommunication
Equipment Industry
1.77
2.44
1.52
1.47
2.08
1.23
61 days
50 days
73 days
6.25
6.01
5.66
4.37
1.58
6.24
0.86
0.61
0.90
0.64
0.34
0.65
1.77
0.52
1.82
NA
NA
NA
32.76%
37.49%
29.52%
-9.31%
-3.00%
-1.24%
-7.98%
-1.82%
-1.11%
-22.11%
-2.78%
-3.14%
2.77
1.52
2.82
Note: Ratios are derived from the data in Appendices A, B, and C.
Evaluating Motorola relative to the semiconductor industry, we first note that Motorola is slightly less
liquid than the average firm in the industry, with both a current ratio and a quick ratio that is lower than the industry
average. Motorola’s average collection period, at 61 days, is lower than the industry average of 50 days, indicating
Motorola should evaluate its credit policies. Both fixed asset turnover and total asset turnover are above the
semiconductor industry averages, indicating that Motorola is using its assets more efficiently than the industry
average in generating sales. Motorola’s debt ratio and debt-to-equity ratio indicate that Motorola is more leveraged
than the average firm in the industry. This higher leverage, in part, explains Motorola’s poor financial performance
relative to the semiconductor industry because the leverage commits Motorola to interest payments that must be paid
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
26
regardless of economic and market conditions. The ratios indicate that Motorola has a higher cost of sales than the
average firm in the semiconductor industry, resulting in a lower gross profit margin and higher indirect costs,
resulting in lower net profit margin performance relative to the semiconductor industry.
The situation is different when evaluating Motorola relative to the telecommunications equipment industry
and, considering that the majority of Motorola’s business is in this industry rather than the semiconductor industry,
this is the more interesting and relevant story. Relative to the telecommunications equipment industry, Motorola has
a better liquidity position, with both the current ratio and the quick ratio being higher than the industry average.
Motorola collects receivables quicker than the average firm in this industry. Relative to this industry, Motorola may
want to evaluate credit policies to determine if perhaps strict credit policies are negatively impacting sales.
Motorola uses its total assets slightly less efficiently than the average firm in the telecommunications equipment
industry and its fixed asset turnover is significantly less than the industry average, at 4.37 compared to the industry
average of 6.24. Motorola is more highly leveraged than the average firm in the telecommunications industry.
Motorola may want to examine its capital structure policy to ensure it has the right balance of benefit from the tax
shield of increased debt relative to the bankruptcy and related financial distress costs associated with increased debt.
Several explanations are possible for the deviation from industry norms. Perhaps this is the result of a
conscious choice to invest heavily in technology and automation in its manufacturing processes (as opposed to a
more labor-intensive manufacturing strategy). While such fixed investments will yield significant gains in good
market conditions, the investments commit the firm to fixed costs (depreciation), even in bad economic conditions.
Alternatively, the poor fixed asset turnover may indicate overcapacity caused by extremely poor forecasts of future
sales. Or, the poor ratio may indicate a fundamental inability or inefficiency in using the deployed assets. Motorola
is slightly less leveraged, with a lower debt and debt-to-equity ratio. Keep in mind, though, that the debt ratios used
in the ratio analysis above used total liabilities as a measure of debt. In contrast, capital structure analysis focuses
specifically on long-term debt in calculating leverage.
Motorola has a higher gross profit margin than the average firm in the telecommunications equipment
industry (32.8% versus 29.5%), but has a lower net margin. Motorola has a higher fixed and indirect cost structure.
As an illustration of the potential fixed and indirect cost issues, consider the productivity, which for this purpose is
defined as sales per employee, of Motorola relative to its chief competitor in the telecommunications equipment
industry - Nokia. In 2001, Motorola generated sales of $31,191M with 111,000 employees for a productivity of
$0.27M per employee. In contrast, Nokia generated sales of $27,645M with just 53,800 employees, for a
productivity of $0.53M per employee - nearly double the productivity of Motorola. Clearly, Motorola has
significant costs associated with its level of employment that are not being returned in sales. This is interesting
because Motorola, as observed earlier, also has poor fixed asset use in addition to this effective and/or efficient use
of human assets. Perhaps contributing to the poor fixed and indirect cost structure is that Motorola has elements of
being a conglomerate that most of the other firms in the industry do not have. Motorola is involved in diverse
business segments – telecommunications, semiconductors, automotive components, and batteries, to name a few –
and must evaluate whether the administrative and infrastructure costs of managing these diverse segments are less
than the benefits of having the segments under one corporate umbrella. It is not obvious that the diverse business
segments within Motorola are being used synergistically to increase overall value. If there are not synergies between
the business segments, Motorola shareholders should prefer that Motorola divest the segments as investors can
diversify their portfolios more efficiently than Motorola can. Most of the other firms in the industry do not have to
absorb the costs associated with managing such diverse business activities.
DuPont System of Financial Analysis
A DuPont analysis of Motorola, the semiconductor industry, and the telecommunications equipment
industry is shown in Table 3. The story told by the DuPont analysis is similar to the story told by analyzing ratios;
i.e., Motorola must focus on controlling operating costs. Relative to the semiconductor industry as a whole,
Motorola has an advantage in its leverage ratio (Assets to Equity of 2.77 compared to 1.52 for the industry) and in
its use of assets (Total Asset Turnover of 0.86 compared to 0.61), yet has a poorer return on equity due to its low net
profit margin. While one would expect a somewhat lower net profit margin for a firm with a higher leverage ratio
(the firm has to pay interest to service the debt that gives the higher leverage ratio), in the Motorola case there are
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
27
apparently other operational inefficiencies impacting the net profit margin because the overall return on equity is
less than the industry average. A similar story, though not quite as obvious, is told by comparing Motorola to the
telecommunications equipment industry averages for the DuPont analysis, where Motorola again stands out as being
deficient in its ability to generate profits from its sales.
Table 3: The DuPont Analysis of Motorola and Industries
Motorola
Semiconductor Industry
Telecommunication
Equipment Industry
-22.11%
-2.78%
-3.14%
=
=
=
-9.31%
-3.00%
-1.24%
X
X
X
0.86
0.61
0.90
X
X
X
2.77
1.52
2.82
Figure 1: ROA Analysis for Motorola - 2002
Sales
Gross 26,679
Margin
8,741 -
COGS
17,938
Net Profit
(2,485) - Variable
Expenses
NPM 7,957
-9.3% / Expenses +
11,226 Fixed
Sales Expenses
26,679 3,269
ROA
-8.0% X
Inventory
2,869
Sales +
26,679 Current Accounts
Assets Receivable
TAT 17,134 4,437
0.86 / +
Other
Total Assets Current
31,152 + Assets
9,828
Fixed
Assets
14,018
ROA Analysis
Figure 1 shows the Return on Asset (ROA) portion of the DuPont analysis
ROE = NPM * TAT * A/E = ROA * A/E (1)
and helps to illustrate Motorola’s situation. Large variable and fixed expenses (relative to the level of sales) are
negatively impacting ROA, and these expenses, especially variable expenses (selling, general, and administrative
expenses) since they are perceived to be more easily controllable, need to be closely evaluated. Increases in sales
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
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revenues may also help the ROA situation. Although poor overall market conditions can be blamed for a portion of
Motorola’s low sales figure, Motorola also needs to critically evaluate why it has lost market share in some of its
key business areas over the last several years (for example, Nokia’s and Samsungs market share in wireless handsets
has improved while Motorola’s has declined) making the operating results from poor market conditions even worse.
The impact of Motorola’s decision early in the lifecycle of the cellular industry not to participate in developing
digital cellular technology likely opened the door for firms such as Nokia to gain significant market positions, and
Motorola’s sales – and its financial position - still suffer from this decision. New product development investments
must be closely evaluated to assure that Motorola is developing products that will be valued in the marketplace.
However, competitors will not simply let Motorola gain sales and market share at their expense. Nokia capitalized
on Motorola’s incorrect earlier strategic decision to forego entry in the digital wireless handset arena. Nokia gained
a dominant position in Europe and is now clearly aiming to challenge Motorola’s leadership in CDMA wireless
handset technology in the United States through the introduction of multiple new handset models based on the
CDMA technology prevalent in America (Nokia Unveils New Phones to Crack CDMA). Motorola and Nokia are
also losing share in foreign markets, such as China, because domestic firms in those markets use price advantages to
drive sales (Nokia, Motorola Lose China Market Share to Domestic Companies). Motorola must develop a product
and business strategy to increase sales in the midst of these threats, while at the same time controlling variable and
fixed expenses.
Short Term Liquidity Management
As shown in Table 4, the telecommunication equipment industry averages a current ratio of 1.52 and a
quick ratio of 1.23, so Motorola’s current ratio and quick ratio of 1.77 and 1.47, respectively, compares favorably to
the industry. This, combined with the observation that both ratios are above one, leads to the conclusion that
Motorola is in a solid short-term liquidity position. While this favorable absolute liquidity position is important,
perhaps just as important to debt investors in Motorola is the trend over time in the ratios. In Motorola’s case, there
have been very solid improvements in its liquidity position since 1999 and 2000. Some of this improvement in
liquidity comes from reductions in notes payable and the current portion of long-term debt. But a significant portion
of the improvement is attributable to large increases in cash and cash equivalents. The cash and cash equivalent
balance increased 97% percent during period. In addition to the cash increases seen above. Motorola has very
recently taken additional steps to “further boost” its cash position by selling $325M of Nextel stock (Motorola Sells
$325M of Nextel Stock). This sale of 25 million of Motorola’s 108 million Nextel shares was completed “to realize
the price appreciation of some of its investment in the wireless communications services provider and to enhance its
already strong cash position” (Motorola Completes Sale of 25 Million of Its 108 Million Shares of Nextel). After
the sale, Motorola will remain one of Nextel’s largest shareholders, retaining over a 9% stake in Nextel (Motorola
Sells $325M of Nextel Stock).
Table 4: Short-term Liquidity Analysis
2002
2001
2000
1999
Cash and cash equivalents
6,507
6,082
3,301
3,537
Short-term investments
59
80
354
699
Accounts receivable, net
4,437
4,583
7,092
5,627
Inventories, net
2,869
2,756
5,242
3,707
Other current assets
3,262
3,648
3,896
4,015
Total current assets
17,134
17,149
19,885
17,585
Notes payable & current portion of long-term debt
1,524
870
6,391
2,504
Accounts payable
2,268
2,434
3,492
3,285
Accrued liabilities
5,913
6,394
6,374
7,117
Total current liabilities
9,705
9,698
16,257
12,906
Current Ratio
1.77
1.77
1.22
1.36
Quick Ratio
1.47
1.48
0.90
1.08
Net Working Capital
7,429
7,451
3,628
4,679
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
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Capital Structure & Debt Management
From Table 5, it is evident that there has been a significant change in Motorola’s capital structure over the
last several years. When viewed from either a book value or market value basis, there is a significant increase in
leverage. Motorola’s long-term debt increased by more than 85% from 2000 to 2001, while equity dropped on both
a book value and market value basis. From the data, it does not appear that Motorola has a strict or a tight target
debt-equity ratio that they maintain to balance the benefits of debt (primarily, the tax savings due to interest) with
the cost of debt (primarily, financial distress costs), unlike many large firms (Graham and Harvey, 2001). It is
unclear whether Motorola has a strategy to minimize their weighted average cost of capital.
Table 5: Financial Leverage Analysis for Motorola
2002
2001
2000
1999
Long Term Debt, Book Value ($M)
7,779
8,857
4,778
3,573
Long Term Debt, Market Value ($M)
7,722
8,857
4,778
3,573
Stockholders Equity, Book Value ($M)
11,239
13,691
18,612
18,693
# Shares (M)
2,301
2,213
2,257
2,202
Share Price ($)
8.01
16.05
19.59
44.72
Stockholders Equity, Market Value ($M)
18,431
35,523
44,207
98,473
Debt/Equity (Book Value)
0.69
0.65
0.26
0.19
Debt/Equity (Market Value)
0.42
0.25
0.11
0.04
Note: 2001, 2000, 1999 market value of debt is assumed to be the same as book value of debt.
Some of the increase in long-term debt from 2000 to 2001 was used to replace short-term debt (Motorola
2001 Proxy Statement). However, we observed earlier that cash balances increased significantly in the same time
period, indicating that some of the long-term financing was used to improve the short-term liquidity position. But
these improvements in the short-term liquidity position came at the expense of an increase in operating risk. The
increased leverage committed the company to increase interest payments to service the long-term debt. Interest
payments increased from $529M to $844M from 2000 to 2001, increasing Motorola’s losses in 2001 as economic
and market conditions worsened (Motorola 2001 Proxy Statement). The significant amount of debt added in 2001
could also impact Motorola’s ability to acquire long-term debt at favorable rates in the future. If funds are needed
beyond what are available internally, Motorola may have no choice but to turn to the equity market, which is
generally considered to be unfavorable at this point in time. The increase in long-term debt may, in part, support the
free cash flow hypothesis, which asserts that bad investment decisions are often made in the presence of a large
amount of free cash flow.
While we have examined Motorola’s capital structure from an absolute perspective, it is worthwhile to look
at the capital structure relative to the industry segment that Motorola primarily participates in - the
telecommunications equipment industry. Company-wide financial structure data are shown in Table 6.
Table 6: Financial Leverage Analysis for Industry
Industry
Long Term Debt, Book Value ($M)
56,347
Stockholders Equity, Book Value ($M)
119,349
Stockholders Equity, Market Value ($M)
270,389
Debt/Equity (Book Value)
0.47
Debt/Equity (Market Value)
0.21
In Table 5, Motorola’s debt-equity ratio, on a book value basis, is 0.69, which is higher than the industry
average of 0.42, from in Table 6 and Motorola’s debt-equity ratio on a market value basis is 0.47, double the
industry average of 0.21. So, Motorola has not only increased its leverage, it has increased its leverage well above
the industry average leverage ratio. Is this bad in the sense that the higher leverage level is detracting from firm
value? We believe that this question is difficult to answer with information from publicly available sources. The
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
30
appropriate amount of leverage is unique to each firm based on the firm balancing the tax benefits of increased debt
against the financial distress costs associated with increased debt. However, the deviation from the industry average
leverage ratio should be closely examined as, on average, other firms in similar business situations see the
appropriate balance between the tax shelter benefit and distress costs at much lower levels of leverage.
SUMMARY AND CONCLUSIONS
In this paper, we demonstrate that financial ratio analysis using data for an actual company – Motorola -
and industry - telecommunications and semiconductor - is complicated and is further complicated for companies that
do not readily fall into a single industry. Motorola has six operating units that fall into several industries with two
industries accounting for most of the sales – telecommunications and semi-conductor. The differences in the
industry characteristics of these two industries complicate the financial ratio analysis of Motorola. However, a more
relevant picture of the operating characteristics of Motorola is achieved by increasing the complexity of the analysis;
that is, by comparing Motorola to both industries.
AUTHOR INFORMATION
Henry W. Collier is a faculty member emeritus of accounting at the University of Wollongong. Professor Collier
has published in numerous journals including The Accounting Educators' Journal, Applied Financial Economics,
Asia Pacific Journal of Finance and Banking Research, The Journal of Current Research in Global Business, The
Journal of Diversity Management, Financial Practice and Education, Managerial Finance,
Timothy Grai works in the automobile industry and is a former MBA student at Oakland University.
Steve Haslitt works in the automobile industry and is a former MBA student at Oakland University.
Carl B. McGowan, Jr., PhD, CFA is a Professor of Finance at Norfolk State University. Dr. McGowan has a BA
in International Relations (Syracuse), an MBA in Finance (Eastern Michigan), and a PhD in Business
Administration (Finance) from Michigan State. From 2003 to 2004, he held the RHB Bank Distinguished Chair in
Finance at the Universiti Kebangsaan Malaysia and has taught in Cost Rica, Malaysia, Moscow, Saudi Arabia, and
The UAE. Professor McGowan has published in numerous journals including Applied Financial Economics,
Decision Science, Financial Practice and Education, The Financial Review, International Business and Economics
Research Journal, The Journal of Applied Business Research, The Journal of Diversity Management, The Journal of
Real Estate Research, Managerial Finance, Managing Global Transitions, The Southwestern Economic Review, and
Urban Studies.
REFERENCES
1. Brigham, Eugene F. and Joel F. Houston. Fundamentals of Financial Management, Ninth Edition,
Harcourt College Publishers, Fort Worth, 2001.
2. Graham, John R. and Campbell R. Harvey. “The Theory and Practice of Corporate Finance: Evidence
from the Field,” Journal of Financial Economics, 60, 2001, pp. 187-243.
3. Motorola Completes Sale of 25 Million of Its 108 Million Shares of Nextel, retrieved from
http://biz.yahoo.com/prnews/030304/cgtu025_1.html
4. Motorola Sells $325M of Nextel Stock, retrieve from
http//biz.yahoo.com/ap/030305/Motorola_Nextel_1.html
5. Nokia Unveils New Phones to Crack CDMA Market, retrieved from
http://biz.yahoo.com/rc/030317_tech_nokia_handsets_2.html
6. Nokia, Motorola Lose China Market Share to Domestic Companies, retrieved from
http://biz.yahoo.com/djus/030314/0020000011_1.html
7. Reiter, Chris. Mobile Phone Sales Rose 6% to 423 Million Units Last Year, Dow Jones Business New,
retrieved from http://biz.yahoo.com/djus/030309/2037000327_3.html
8. Yahoo.finance.com
9. Yahoo.marketguide.com
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
31
APPENDIX A
Motorola
Segment Sales and Earnings
2002
2001
Segment
Sales
%Sales
OE
OM
Sales
%Sales
OE
%OE
d(Sales)
PCS
10847
37.8%
804
7.4%
10436
33.2%
-318
-3.0%
3.9%
SPS
4818
16.8%
-283
-5.9%
4936
15.7%
-1000
-20.3%
-2.4%
GTSS
4540
15.8%
-11
-0.2%
6442
20.5%
32
0.5%
-29.5%
CGISS
3729
13.0%
361
9.7%
3850
12.3%
350
9.1%
-3.1%
BCS
2087
7.3%
257
12.3%
2854
9.1%
450
15.8%
-26.9%
IESS
2189
7.6%
115
5.3%
2239
7.1%
-12
-0.5%
-2.2%
OPS
486
1.7%
-267
-54.9%
658
2.1%
-212
-32.2%
-26.1%
Total
28696
100.0%
976
31415
100.0%
-710
-8.7%
OE
Operating Earnings
OM
Operating Margin
PCS
Personal Communications Segment
SPS
Semiconductor Products Segment
GTSS
Global Telecom Solutions Segment
CGISS
Commercial, Government, and Industrial Solutions Segment
BCS
Broadband Communications Segment
IESS
Integrated Electronic Systems Segment
OPS
Other Products Segment
APPENDIX B
Motorola
Telecommunications Industry
Alcatel
Cisco
Ericcson-
Lucent
NEC
Nortel
Nokia
Qualcomm
Siemens
Motorloa
Tele
Sony
Networks
Comm
ALA
CSCO
EDICY
Lucent
NIPNY
NT
NOK
QCOM
MOT
Industry
Assets
Accts Receivable
14956
1105
2923
1647
7737
2923
6143
925
16358
4437
59154
Inventory
4681
880
6741
1363
5366
1579
1920
88
11462
2869
36950
Current Assets
24650
17433
22926
7629
19854
11762
16664
4384
47325
17134
189760
Net Fixed Assets
4202
4102
1887
3503
9206
2571
2700
686
12612
6104
47573
Total Assets
36549
37795
29345
17791
41365
21137
24088
6510
83711
31152
329443
Liabilities
Current Liabilities
15547
8375
10754
6326
16148
9611
10275
675
37283
9705
124698
Long Term Debt
5879
0
6118
4986
15013
4094
304
94
11002
8857
56347
Total Liabilities
26700
9124
20882
20845
29451
15676
11015
1073
57867
19913
212546
Shareholder Equity
9849
28671
8464
-3054
11914
5461
13074
5437
25844
11239
116897
L&SE
36549
37795
29345
17791
41365
21137
24088
6510
83711
31152
329443
Revenues
25353
18915
27208
12321
42109
17511
33501
3040
90238
26679
296874
COGS
19074
6902
20408
10769
32287
14167
21252
1137
65314
17938
209248
Gross Profit
6279
12013
6799
1552
9822
3344
12249
1902
24925
8741
87626
Interest
679
382
2060
311
167
26
101
356
4081
Taxes
-1261
-1034
4757
-1231
-3252
1280
101
912
-961
-689
Net Income
-4963
-2495
11753
-2576
-8414
2363
360
2789
-2485
-3668
Price
7
13
6
2
3
2
13
34
39
8
Shares Outstanding (M)
1260
7110
1660
3910
1650
3850
4790
789
888
2301
Market Capitalization
8253
92501
6100
6100
5726
7970
60689
27012
34329
18431
270389
Journal of Business Case Studies – July/August 2010 Volume 6, Number 4
32
APPENDIX C
Motorola
Semi-Conductor Industry Data
Advance
Analog
Atmel
Fairchild
Intel
Maxim
Micron
National
NVIDIA
ST
Staiwan
Texas Inst
XILINK
Motorola MOT
Semi
Micro
Devices
Semi
Micro
Semi
Instrument
Conductor
AMD
ADI
ATML
FCS
INTC
MXIM
MU
NVDA
STM
TSM
TXN
XLNX
MOT
Industry
Assets
Accts Receivable
660
218
187
134
2607
130
538
132
147
902
571
1198
148
4437
12008
Inventory
381
247
302
209
2253
139
545
145
214
743
281
751
79
2869
9157
Current Assets
2353
3435
1189
875
17633
1236
2119
1073
1234
4558
2024
5775
999
17134
61636
Net Fixed Assets
2739
908
1652
660
18121
746
4700
737
120
5888
7183
5589
450
6104
55596
Total Assets
5647
4885
3024
2149
44395
2011
7555
2289
1503
10798
11262
15779
2335
31152
144784
Liabilities
Current Liabilities
1314
528
735
199
6570
229
753
404
434
1687
953
1580
196
9705
25286
Total Liabilities
2092
2042
1538
1341
8565
270
1189
508
739
4687
2617
3900
432
19913
49831
Shareholder
Equity
3555
2843
1487
808
35830
1741
6367
1781
764
6111
8645
11879
1904
11239
94953
L&SE
5647
4885
3024
2149
44395
2011
7555
2289
1503
10798
11262
15779
2335
31152
144784
Revenues
3892
2277
1472
1408
26539
1025
2589
1495
1370
6357
3675
8201
1016
26679
87993
COGS
2590
1008
1058
1054
13487
312
2700
941
850
4047
2636
5824
558
17938
55003
Gross Profit
1302
1269
415
354
13052
713
-111
553
519
2310
1039
2377
458
8741
32991
Interest
61
63
57
104
17
16
13
90
61
0
356
838
Taxes
-15
151
-113
-22
892
128
-92
-2
76
61
-107
-225
-79
-961
-308
Net Income
-61
356
-418
-42
1291
259
-907
-122
177
257
-628
-201
-114
-2485
-2637
Price
4.94
23.4
2.01
10.55
15.43
30.75
8.16
13
10.03
17.65
15.46
18.76
8.01