Analyst downgrades Motorola rating to "sell"

July 31
11:27 AM 2013

Motorola's strategy of insistent buying back of stocks last week prompted several investors and analysts to think negatively of the mobile carrier's outlook. The company experienced sputtering growth in the past trading days.

According to Gimme Credit LLC, a research and analyst firm based in Chicago, Motorola's long-term debt had already rocketed to US$600 million due to constant buy backs. This figure is equal to 32%, which Gimme Credit's Dave Novosel said will increase in the future.

Gimme Credit downgraded Motorola's bonds rating to "buy" from "sell" today, stating that more borrowing will ensue. He said that Motorla's debt is likely to swell as it bought back stocks amounting to almost US$907 million.

Motorola's stock fell by 10% as equity investors remained unimpressed with this buyback spree.

"Rather sluggish top-line growth, deteriorating margins, lower free cashflow and a more aggressive financial policy do not bode well for the credit profile," said Novosel, who has been watching Motorola's market performance for years now.

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