Motorola’s $30 billion question

Is this a surprise? Motorola is the worst electronic product I have ever used. In addition to having the suckiest product, they have horrible customer service. After my run-in with the horrible Razr and Q, I vowed never to buy any Motorola product ever again, and have convinced numerous people to do the same. Thankfully, I am a lawyer and see so many other lawyers at depositions, in court, and socially, who must all possess a handheld device. So, I have been able to spread the word. Of course, I go further to speaking to complete strangers because my aversion for Motorola is so great. When you make a crappy product, is it a surprise that your profits look like crap, too? Motorola, get a clue.

I’m not going to address the mishmash of terms that “Bill” has posted below (a Price to Sales ratio? WTF?)

I will agree that at a PE of 79, RIM is a bubble. Motorola just partnered with the original designers of the Sidekick to build a true open cellphone platform that will provide email, texting, calendar, phone, camera, web browsing, GPS, and more on a low cost platform.

I think that RIMs high cost reliance on the business community will not extend to the (much bigger) cellphone market at large, especially if Motorola succeeds in building a low cost, open platform that can be delivered on a 150$ cellphone. Apple should look out as well.

With the nature of tech stocks what they are, and the businesses they represent, they will always track at a premium to more mundane businesses.

After all, their boom and bust product cycles are niot attractive to must investors unless you can get something extra for your risk.

After all all stocks are a gamble in the long run. Hense the disclaimer on ALL stock information.

So sure, fools may rush in. But their are some mighty smart, rich fools.

RIM is a Bubble
The Greater Fools either don’t understand numbers or ignore them.
They seem to follow Cramer’s 2000 advice-

“…you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can’t make money for you anymore, and that is all that matters. We don’t use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray. If we use any of what Graham and Dodd teach us, we wouldn’t have a dime under management….”
http://www.thestreet.com/funds/smarter/891820.html

They only understand hype. HYPE like-Buyouts by MSFT, NOK, IBM, 100% GROWTH, etc.

They don’t understand that the company is priced to perfection, with an unknown future many year away.

They understand that RIM is growing, Some think at 100%, after 10 years sales are only $4.2 bn.
They don’t understand the meaning or what it means that RIM has-
Market Valuation ….$65 bn
Valued at 16 times annual sales
Price/Earning ratio….79

Some expect a price of $200/sh-
They don’t understand that would give RIM a valuation of over $110 billion. If RIM’s sales increased 20% to $5bn, RIM would have a price/sales ratio of 20.

Example-
Would a potential buyer of a company that has sales of $100,000 pay $2 million for it (20 times sales)?
If $2 ml was invested at 6% it would yield $120,000, which is more that sales.

Do they also ignore valuation when they purchase a car or other assets? A Mercedes may be a great car, but would they pay millions of $s for one that is worth $75,000?

THE GREATER FOOL THEORY-
Popular among laymen but recently discredited by empirical research , greater fool’s theory portrays bubbles as driven by the behavior of a perennially optimistic market participants (the fools) who buy overvalued assets in anticipation of selling it to other rapacious speculators (the greater fools) at a much higher price. According to this unsupported explanation, the bubbles continue as long as the fools can find greater fools to pay up for the overvalued asset. The bubbles will end only when the greater fool becomes the greatest fool who pays the top price for the overvalued asset and can no longer find another buyer to pay for it at a higher price.
http://en.wikipedia.org/wiki/Economic_bubble