Motorola And Nokia Company Financial Analysis

1666 words - 7 pages

For the analysis, I selected Motorola and Nokia. The two companies control a dominant share of the cellular handset market. Successful competition in the cellular equipment industry requires companies that can plan for change, identify their worldwide position, and recognize trends in their financial results and in the tastes of their customers.Motorola Cash Flow, Revenue and Income AnalysisOver the past three years, Motorola struggled mightily. In 2001 and 2002, the company saw significant declines in revenues and net income, ultimately resulting in the resignation of the company's CEO and a restructuring in the second half of 2003. The failures lead to declines in revenues and net profits year-over-year from 2000 to 2001 and 2002 as summarized below (EDGAROnline, 2004):Motorola Revenue and Net Profit SummaryYear Revenue ($ million) Net Profit ($ million)2000 37,580 1,3182001 30,004 (3,937)2002 26,679 (2,485)2003 27,058 893Motorola's cash flow statements for 2001 through 2003 are summarized below (EDGAROnline, 2004):Cash Flow All numbers in thousandsPERIOD ENDING 31-Dec-03 31-Dec-02 31-Dec-01Net Income 893,000 (2,485,000) (3,937,000)Operating Activities, Cash Flows Provided By or Used InDepreciation 1,667,000 2,108,000 2,552,000Adjustments To Net Income (487,000) 2,352,000 1,834,000Changes In Accounts Receivables (54,000) 155,000 2,445,000Changes In Liabilities 374,000 (980,000) (3,030,000)Changes In Inventories 77,000 (102,000) 1,838,000Changes In Other Operating Activities 301,000 291,000 274,000Total Cash Flow From Operating Activities 2,771,000 1,339,000 1,976,000Investing Activities, Cash Flows Provided By or Used InCapital Expenditures (655,000) (607,000) (1,321,000)Investments 734,000 119,000 4,296,000Other Cashflows from Investing Activities (102,000) 49,000 (498,000)Total Cash Flows From Investing Activities (23,000) (439,000) 2,477,000Financing Activities, Cash Flows Provided By or Used InDividends Paid (372,000) (364,000) (356,000)Sale Purchase of Stock 159,000 401,000 362,000Net Borrowings (1,253,000) (521,000) (1,826,000)Other Cash Flows from Financing Activities - - -Total Cash Flows From Financing Activities (1,466,000) (484,000) (1,820,000)Effect Of Exchange Rate Changes 88,000 9,000 148,000Change In Cash and Cash Equivalents $1,370,000 $425,000 $2,781,000Despite posting net losses in 2001 and 2002, Motorola generated free cash flow in all three years, including healthy results from operating activities. Cash flow generated by operating activities was most dramatically affected by investments in 2001 totaling over $4.2 billion and a nearly $2 billion change in net borrowing. Despite capital expenditures of over $1.3 billion, the company generated nearly $500 million in cash from investing and financing activities in 2001.Cash flow in 2002 was significantly lower than cash flow generated in 2001 or 2003. The company's lower overall revenues led to a significant decrease in cash flow from operations year-over-year in 2002. Although...

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