Motorola

Investment Notes

MOT

Please see disclaimer at bottom of this document

February 13, 2006 (21.50)

Started buying MOT at $12.30 (Freescale adjusted) in January 2002. I bought in 2002 because of the opportunity of gains via a potential telecom depression. Since 2002, the price has increased to $21.50. My projections of Sales, typical metrics and other potential expectations were met and beat by MOT. Not necessarily company specific, as it may have been industry specific.

Below on 2/13/06, you will see some quick estimates. I think that I am using conservative metrics, yet, I have NOT double checked all metrics. There is an obvious difference in ROI computed under 2 methods. Theoretically, the lesser of the ROI could be potentially considered a margin of safety.

Large vendor in the wireless handset market, wireless infrastructure market and cable equipment market.

Standard and Poor’s listed bond rating at BBB+ on 2/11/06.

Notes:

1. Shares outstanding on 12/31/05 is 2599.9

2. Guidance given during CC on 1/19/06

a. eps for 1Q06 $0.25 – $0.27 including stock option compensation expense

b. estimated annual stock option expense b/w $250 – $300M annually, spread evenly quarter by quarter.

c. 1Q06 shares outstanding expected to be 2.56B shares.

d. 1Q06 Tax Rate expected at 36%, also expects that to be number for all of 2006.

e. Expects improvement on operating margin, which is currently 11.8%. They claim that is “excluding the significant items I discussed earlier. I do not know if he is referring to stock option compensation or the Telsim collection or all of the above.

3. estimates I have collected:

Revenue

EPS

4.               Morgan Stanley expects share count to be as follows:

5. Review of DEF 14A filed 3/14/05

a. Stock Ownership Table from Def 14A

Officer’s and director’s appear to own b/w 3.5% to 3.9% of common stock.

b. I looked at compensation table. MOT does not appear to be shy with paying their head guys. Many make in excess of $1M. Zander in 2004 cleared $6.5M in compensation. Account for RSA’s he made another $9M and has options on 2.6M shares.

c. Option grants in Fiscal 2004 , expiring in 2014, typical base price is $16.30/ share, yet Zander has most at exercise price of $12.97.

d.               Retirement plans appear very friendly to officers. 

6. Some quick back of the envelope valuation scenarios. I think my projections were conservative. This is merely a road map for moving forward. I used eps rates of 8% for 10N and 3% thereafter.

Please keep in mind that $1.11 below in eps is below all estimates I have seen.  I am trying to be as conservative as possible.

Below is an interesting way I valued Motorola. There are so many possible road blocks, yet as I mentioned above, this is a road map for me. So far this method seems to be the method I am favoring. It seems logical, yet probably very far from what will happen in the future. I have not assumed dividends, as I am assuming the earnings become future equity. As I write that, I think perhaps here is a flaw in my analysis. I wonder if I am double counting earnings and equity. I don’t think so, but I need to continue to think about that and refine it as well.

Below is an alternate method.  I don’t think it is an appropriate method, as it gives no credence to real assets that will exist in 15 years.  Nevertheless, I kind of like seeing that a potential worst case scenario could still be an annualized return of 3.15%.

The following sanity test uses a net margin multiplier.  This method also doesn’t take into account real assets which would exist in 15N.

Intrinsic Value Work from separate spreadsheet.

Disclaimer

If you are a client of ours, and if you have questions regarding Motorola, please call our office. If you are not a client of Redfield, Blonsky & Co. LLC Investment Management Division and are reading these notes, we urge you to do your own research. We will not be responsible for any person making an investment decision based on these notes. these notes are a “by-product” of our research. We are not responsible for the accuracy of these notes. We are not responsible for errors that may occur in these notes. Please do not rely on us to monitor or update this or any other report we may issue. In theory, we could come across some type of data or idea, which causes us to eliminate our long position of Motorola from our portfolios. We will not notify readers revisions to these notes. We are not responsible to keep readers of these notes updated for changes or material errors or for any reason whatsoever. We manage portfolios for clients, and those clients are our greatest concern as it relates to investing. Certain clients of Redfield, Blonsky & Co LLC may not have Motorola in their portfolios. There could be various reasons for this. Again, if you would like to discuss Motorola, please contact Ronald R. Redfield, CPA, PFS (partner in charge of investment management division).

Information herein is believed to be reliable, but its accuracy and completeness cannot be guaranteed. Opinions, estimates, and projections constitute our judgment and are subject to change without notice. This publication is provided to you for information purposes only and is not intended as an offer or solicitation. Redfield, Blonsky & Co. LLC and Ronald R Redfield, CPA, PFS, may hold a position or act as an advisor on any investments mentioned in a report or discussion.