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How To Destroy Value

How To Destroy Value

motorolaCourtesy of Eric J. Fox at The Market Prognosticator

It was reported today that Motorola (MOT) is shopping around its division that makes set top boxes and other equipment for cable and phone companies. The rumored asking price is around $4.5 billion.

That sounds great, but unfortunately for Motorola and its shareholders, the company paid $11 billion for it 10 years ago. Read how management gushed over it back then:

"This partnership will enable us to expand our portfolio for network access, delivering next-generation solutions along with ‘home hubs’ that will handle high-speed Internet access and video entertainment, as well as carrier-quality voice services," Motorola chief executive Christopher B. Galvin said. "People want access tailored their way and the ability to get online quickly and simply."

Some might say that Motorola didn’t really pay $11 billion since it issued its own stock to complete the purchase. This is nonsense of course.

Deals like this might be a contributing reason to explain why Motorola stock has been a disappointment to many investors.

 


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