Business Analysis Part II
November 14, 2011
Business Analysis Part II
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.
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 ...view middle of the document...
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.
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.
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.
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.
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....