Thank goodness for small blessings. And thank Motorola (NYSE: MOT), too.
Earlier this week, I described the rash of misfortunes at the nation's leading cell-phone maker: employee layoffs, steadily slipping margins, and executives jumping ship to AMD (NYSE: AMD) and Cisco (Nasdaq: CSCO). After all that bad news, I asked for just one bit of good news in Wednesday's report -- word that Motorola hadn't burned cash in Q4, at least.
Thank you
With the stock now down nearly 25% from where it closed out last week, you might think Motorola flubbed that task -- but it didn't. Instead, Q4 saw the firm generate more than $300 million in free cash flow, leaving Motorola's number for the year at an anemic but positive $258 million.
Granted, a quarter-billion isn't a lot of lucre to support Motorola's $23 billion market cap. And granted, it leaves the firm with a nosebleed price-to-free cash flow ratio of 89. But on the bright side, it's at least a positive number, which is more than you can say about Motorola's GAAP number for the year. The firm lost $49 million, while Motorola's nemesis Nokia (NYSE: NOK) counted up $2.6 billion in profits in Q4 alone.
Stop the insanity
Now that we've got Motorola's "good" news out of the way, let me address one small criticism to Motorola management: Are you guys out of your ever-loving minds?
On the one hand, Motorola is saying all the right things about "rationalizing the company's cost structure and working to get Mobile Devices back on track." The company, we are told, will focus on "improving ... operating cash flow ... while continuing to drive cost savings opportunities." But all the while, Motorola keeps unwisely pursuing its biggest driver of unnecessary costs: Share buybacks.
Motorola boasts about spending $7.7 billion to repurchase 385 million shares over the last three years. That works out to about $20 a share -- twice what those shares are worth today. Yet despite destroying an estimated $3.35 billion in shareholder value through this program, Motorola just keeps on buying its own rapidly devaluing shares, having doled out $557 million for buybacks in Q4 alone.
Does this seem like the best way to save the company, Motorola? You should be focusing your efforts on what you got right in Q4 -- getting the cash flowing, and keeping capex down. Do that, and don't worry about buybacks. We'll buy your shares ourselves.
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