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Business Analysis Part Ii Mgt521

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Business Analysis Part II
MGT521
November 14, 2011
James Bingel

Business Analysis Part II
Introduction
This paper will provide a review of Motorola Mobility Inc.'s (MMI) financial statements to determine the financial health of the company. MMI's financial health will be compared to that of Nokia and Research in Motion (RIM), two companies within the large-cap range ($5 - $50B). A benchmarking analysis will also be performed, using Apple as the benchmark for it products, processes, and best practices.
Financials
Income Statement - A review of MMI's income statement reveals that it has been operating at a net loss for the last three quarters, from a net loss of eighty one million dollars for the quarter ending April 2, 2011, to a thirty two million dollar loss for the quarter ending in October 1, 2011. While it is operating at a loss, the amount of the loss has decreased the last three quarters, while revenues have been relatively flat, indicating that MMI is moving toward reducing their expenses, and may look to operate at a profit for the fourth quarter of 2011. Comparatively, Nokia has also been operating at a loss for the 2nd and 3rd quarters of 2011, and RIM has been averaging $722M in profit over the last five quarters. RIM however has had a decline in total revenue, from $5.4B for the period November 27, 2010 to $4.2B for the period August 27, 2011.
Balance Sheet - MMI's balance sheet reveals the company has almost nine and a half billion dollars in total assets, with almost four and a half billion in cash and short term investments. The fact that MMI has access to that much cash is a good sign of its financial health. It has a debt to assets ratio of less than 1%. It also has almost five billion dollars in equity, which is also considered a company's net worth (Nickels, McHugh, & McHugh, 2010). This is a good sign that the company is in a strong financial position.
Nokia has over €36B in assets, with eleven billion euros in cash and short term investments. It has a debt to assets ratio of 15%, and over twelve billion euros in shareholder's equity. RIM has over $12B in total assets, and is debt-free.
Cash Flow statement - For the quarter ending October 1, 2011, MMI's net change in cash flow was over three billion dollars. Most of the cash flowing to the company is from the issuance of stock. This indicates that MMI has a very positive cash flow, and will be able to pay expenses when due. This is another good indicator of financial health.
Alternatively, RIM, for the period August 27, 2011, shows a net change in cash of $940M. Nokia showed a negative cash flow for the 2nd quarter of 2011, while showed a quick turnaround in cash for the 3rd quarter with a €834M positive cash flow.
Analysis
MMI's financials indicate that the company is in good financial health. The company shows that is cash heavy, which is probably consistent with the fact it just split from its parent company, Motorola, and was initially offered as a public stock in October 2010. The impending acquisition by Google with dictate any major cash expenditures, as MMI would want the company to look as solvent as possible. It is operating at a loss currently, which would be a cause for concern. However, Google can even view this acquisition as a loss-leader, because of MMI's vast portfolio of patents in the mobile technology industry.
Industry Comparison
While RIM is a company free from debt, it does not operate with a lot of cash, and has reported a decline in revenue consistent with its decline in market share (Weiss, 2011). Nokia is also currently in a strong financial position, but both Nokia and RIM are losing US market share rapidly to Apple, with the array of products it offers.
Technological Advantages
As discussed in Part I, MMI's biggest asset is in its intellectual property, with over 18,000 patents. This has made the company attractive to Google, proprietor of the popular Android operating system for mobile devices (Costa, 2011). This pending acquisition of MMI by Google gives Google a hardware arm for its software, and allow MMI the first opportunity for new versions of the Android software. It also aids in its race for technology patents with Apple. While Nokia struggles to make headway into the smartphone market (The Street, 2011), and RIM is hoping that its new operating system will prevent even more investors from selling their stake in the company (Weiss, 2011), a merge with Android creator proves a major technological advantage for MMI.
Benchmarking Analysis
MMI would have to look to Apple as a benchmark. Although Nokia is the top seller of mobile units worldwide (Gartner, 2011) it's market has declined for several years in the US and other developed countries (The Street, 2011), while Apple is the top seller of mobile units in the US. Apple offers a wide array of mobile products, not just phones. It offers the iPod, a mobile music player, which has many variations, including the Nano, a very small iPod that can be clipped to a user's clothing. It also has a tablet device, the iPad, which is a very powerful multimedia gadget with a wide array of variations, and applications, both in entertainment, business, and even other fields, like medicine.
Motorola has introduced some similar products in an attempt to compete with Apple. Its tablet device, the Xoom, is powered by the Android operating system, and allows users to run programs and view video on the Adobe Flash platform, a deficiency in Apple products. It has proven, however, to be a slow seller (Webster, 2011). In response to the slow sales, MMI launched the Xoom 2, which is lighter, and has 4G capabilities, in the UK and Ireland, but no release date announce for the US (Whitney, 2011). It is also launched the MOTOACTV, a watch with an mp3 player and fitness applications designed to attract the fitness-minded individual. This will also compete with the iPod and iPod Nano, which also target the fitness-minded person with the many apps available on iTunes.
Apple offers one phone product; the iPhone, which is offered by multiple carriers. It also offers one music player with different storage capacities, in addition to the Nano. MMI can learn from this approach; it currently offers the Droid, Droid Bionic, Droid RAZR, Atrix, Photon, Titanium, etc; a total of sixteen models for three different carriers. Apple makes one product for their customers; the brand recognition and loyalty increases with every iPhone launch, and customers spend healthy sums of money, and spend long hours in line to get one. MMI should offer one phone to all its carriers. Although MMI offers phones for all price ranges, if they made one phone that had all their technological advances, people would line up to purchase that phone, and pay very good money to get it as well. Offering one phone will allow MMI to streamline its processes, possibly making a better more efficient product, and even reducing costs.
Summary
A review of MMI's financials find the company in good financial health, with a strong positive cash flow, high shareholder equity, and a low debt to asset ratio. In comparison to other company in the industry, it proves to have a more positive cash flow, but not as many assets as more established companies. It has a large portfolio of technological patents, which will help it moving forward as it tries to compete with Apple, who has proven to be the benchmark, through it extremely popular line of products. MMI is a company with strong financials, and big upside, which will prove to be a great addition to any portfolio.

Bibliography
Costa, D. (2011, August 15). Why Google is Buying Motorola Mobility. Retrieved November 6, 2011, from PCMag.com: http://www.pcmag.com/article2/0,2817,2391094,00.asp#fbid=38HAHiFBv9x
Gartner. (2011, February 9). Gartner Newsroom. Retrieved November 6, 2011, from http://www.gartner.com/it/page.jsp?id=1543014
Nickels, W. G., McHugh, J. M., & McHugh, S. M. (2010). Understanding Business, Ninth Edition. McGraw-Hill Company.
The Street. (2011, November 14). How Nokia's Lumia Smartphone Will Fare in Developed Markets. Retrieved November 14, 2011, from The Street: http://www.thestreet.com/story/11309886/1/how-nokias-lumia-smartphone-will-fare-in-developed-markets.html?cm_ven=GOOGLEN
Webster, S. (2011). Motorola Expects Less Than 1.5 Million Xoom Sales for 2011. Retrieved November 14, 2011, from Android Guys website: http://www.androidguys.com/2011/07/29/motorola-expects-15-million-xoom-sales-2011/
Weiss, M. (2011, November 11). RIM’s New Operating System Will ‘Surprise,’ Cooperman Says. Retrieved November 14, 2011, from Bloomberg website: http://www.bloomberg.com/news/2011-11-11/rim-s-new-operating-system-will-surprise-omega-advisors-cooperman-says.html
Whitney, L. (2011, November 3). Motorola Xoom 2: Second time's the charm? Retrieved November 14, 2011, from CNET News website: http://news.cnet.com/8301-1023_3-57317576-93/motorola-xoom-2-second-times-the-charm/…...

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