Q. I’ve owned Motorola Inc. shares for five years. I’ve been happy with them for a while, but remember when they weren’t so hot and worry if this could happen again. What do you think?
K.C., via the Internet
A. Performance lately has been sharp as a razor. Sales of the ultraslim, upscale Razr cell phone helped profits more than triple, to $1.75 billion in the most recent quarter. New Razr-style models also appear promising.
Motorola says its global share of the rapidly growing cell phone market has risen to 18.6 percent, compared with 13.3 percent about a year ago. That ranks second, behind Nokia Corp.’s share of more than 30 percent. Cell phones represent half of Motorola sales, with additional income from infrastructure for wireless and cable networks.
Shares of Motorola (MOT) are up 37 percent this year, following gains of 37 percent last year and 62 percent in 2003. Investors must be realistic about intense competition in the cell phone industry that led to its stock declining 42 percent in 2002; 26 percent in 2001; and 59 percent in 2000.
No maker of cell phones has been infallible, because the telecommunications industry and phone styles have unpredictable cycles. For example, sales of the Rokr, a combination phone and digital music player Motorola introduced in partnership with Apple Computer Inc., are disappointing. In addition, Motorola’s profit per handset lags behind some competitors.
Nonetheless, Edward Zander, a Sun Microsystems Inc. veteran who became chief executive in 2004, has Motorola focused on meeting challenges of a volatile high-tech business of more than 100 competing manufacturers.
The balance sheet was improved by spinning off its Freescale Semiconductor Inc. chipmaking division. Motorola recently received a contract to provide low-priced cell phones to developing countries.
Motorola is eliminating 1,900 jobs at 29 U.S. and foreign locations in its supply chain. Total workforce remains at 68,000 because of added engineering and marketing positions. The impact of the Sprint purchase of Nextel Communications, Motorola’s largest customer, will be monitored closely.
Its stock receives a solid consensus “buy” recommendation from Wall Street analysts, according to Thomson Financial, consisting of 12 “strong buys,” 16 “buys” and nine “holds.”
Earnings are expected to grow 30 percent this year, versus 21 percent forecast for the communication equipment industry, according to Thomson. Next year’s projected 13 percent rise compares to 23 percent expected industrywide. The predicted five-year annualized increase of 12 percent compares to 15 percent for its peers.
Q. Can I keep making contributions to my individual retirement account after I retire?
J.T., via the Internet
A. You can continue to contribute to your traditional IRA so long as you receive some sort of earned income in retirement, such as from consulting or part-time work. But you can no longer make contributions to that traditional IRA as of the year you turn 70 1/2.
“With a Roth IRA, on the other hand, you can continue to make contributions at any age, so long as you have earned income,” said Beverly DeVeny, IRA technical consultant for Ed Slott’s IRA Advisor newsletter in Rockville Centre, N.Y.
In addition, while you must start withdrawing from a traditional IRA at age 70 1/2, a Roth IRA owner never has to take withdrawals. That’s why some individuals opt to convert their traditional IRAs to non-deductible Roth IRAs that permit tax-free distributions.
“Most of the time when you run the numbers it makes sense to convert to a Roth IRA, but you do have to pay tax on the amount that you convert,” DeVeny said. “So consider the conversion question in the context of how it affects the taxability of your Social Security income and whether you’ll lose deductions and credits.”
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].