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Tickers in this Article: MOT, NOK, RIMM
Back in January, I penned an article suggesting that Motorola (NYSE: MOT) will need to do a lot more than enact middle management job cuts to drive its earnings line (Click Here to read it).

In that piece I also suggested that I'd steer clear of the stock until it either became so cheap (under $10) that I couldn't resist the temptation to buy it, or until something big (such as a new product) came along that could materially drive it's revenue line.

Motorola's downbeat first quarter earnings guidance only confirms my beliefs.

For those that missed it, this past Wednesday the company disseminated a press release indicating that it will lose between 7 and 9 cents per share on sales of between $9.2 and $9.3 billion. Unfortunately, analysts had been expecting the company to earn as much as 17 cents a share excluding one-time expenses on sales of about $10 billion.

The Competition is Killer
What's the problem? Very simply, Nokia (NYSE: NOK) and Samsung are giving the company fits. Their competitive products and pricing have caused Motorola to play defense and try to retain market share, rather than going on the offensive.

And the emergence of other players such as Research in Motion (Nasdaq: RIMM) haven't helped the situation much either.

Now the optimists in the stock suggest that the company's ongoing cost cutting efforts coupled with its foray into emerging markets could ultimately turn things around. I agree.

But no matter how you slice, it's going to take a long time. In fact, I don't think a full scale turnaround is in the cards for at least another couple of years.

What About the Share Buyback Plan?
If you regularly read my columns, you know that I am usually a big fan of companies that buy back their shares. In fact, I view it as the ultimate vote of confidence.

But I think that Motorola could probably do something better with the roughly $7 billion it plans to plunk down as part of a buy back program. I mean seriously folks, why not take a gamble and buy out Palm (Nasdaq: PALM) which is said to be investigating it's strategic options.

Fact is, I think that might be a better play than buying MOT stock right here. I mean can you tell me if Motorola has bottomed out at this point? I sure can't. So why make a $7 billion plus bet that the tide is about to turn?

The Icahn Angle
Of course, there is a reason for the company's aggressive buyback plans. I think it's that the company is probably looking to appease (and ward off) Carl Icahn who is said to have accumulated a roughly 2.7% interest in the stock at this point and is also said to be seeking a seat on Motorola's board. Heck, Motorola's management is probably afraid they'll lose their jobs if they don't do something drastic!

For those unaware, Icahn has a lengthy history of activism and I view his involvement as a net positive. In fact, I think that Icahn could be one of stock's biggest catalysts over the next several months as he pushes the company to find ways to enhance shareholder value. That being said, investors would be wise to remember that when push comes to shove, Icahn is in this game to forward his own agenda. And what that is isn't exactly clear yet.


In any case, because I wouldn't bet the farm on Icahn (although again he could turn out to be a significant catalyst), I'm left to ponder Motorola's product pipeline for inspiration. And frankly, I haven't heard of anything to get excited about in terms of new product offerings (in either low or high end handsets). Certainly nothing with "RAZR like" promise.

In fact, to me the company's lackluster pipeline suggests that it could have a really tough time trying to capture (or recapture) market share from its competitors in the year ahead. This in turn could mean that even more bad numbers may be on the way.

The Bottom Line
I think that Motorola will eventually right its ship. And who knows, maybe Icahn will come through for the common shareholder. But until I see some clear evidence that the operational tide has turned or that Icahn will prove beneficial for the common shareholder, I'm going to remain on the sidelines.

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