John Keating isn't content with $12.5 billion. Don't know him? You will soon if, like Keating, you own shares of Motorola Mobility Holdings
He's filed a complaint in a Cook County, Ill., circuit court that claims Google's
"Motorola has experienced an economic resurgence since separating into two separate companies ... The Android smartphone technology it relies on continues to gain ground on Apple's
Far as I can tell, Keating hasn't specified an appropriate valuation for Motorola Mobility. But that's understandable. Not only would it be poor negotiating strategy -- i.e., never be first to name a price -- but there's simply no math that's going to make Mr. Moto's smartphone division look cheap at current prices. The whole idea is worthy of a spit-take.
Just look at the numbers. According to Yahoo! Finance, Motorola Mobility trades for a massive premium to the long-term earnings growth analysts expect, resulting in a bubbly and probably unsustainable 4.54 PEG ratio at current prices.
And please, let's not talk about patents, OK? Motorola Mobility's tangible book value stood at $10.38 a share as of July 2. Today's investors (e.g., Google) is paying roughly $27 more a share -- or a little more than $8 billion -- for future growth and intangibles, such as the company's 17,000 assigned and 7,000 pending patents.
I'd have a hard time paying $8 billion for IBM's
Lawyers will have to decide the fate of this suit. But as far as the underlying claim goes -- that Motorola Mobility is still cheap -- it seems to me that neither numbers nor common sense are on Mr. Keating's side. Do you agree? Disagree? You can leave a comment to tell us your thoughts about the acquisition bid and add Motorola Mobility to your watchlist for up-to-date analysis on the stock as soon as it's published.