Q–I have owned shares of Motorola Inc. since 1994. I’m concerned about the downward spiral of its stock price. What are the company’s prospects?
A–Motorola, the world’s largest maker of cellular telephones, is cutting 15,000 jobs and consolidating a number of operations due to nagging problems that include falling analog phone sales, low semiconductor prices and the decline of Asian markets.
The company did, however, recently introduce a new “burn-in” chip method that could cut 15 percent off manufacturing costs and speed up the process by 25 percent. Scheduled to be available in the first quarter of 1999, the new method permits the testing of chips in wafer form, thereby sorting out defective chips sooner.
Motorola has also shipped 170,000 Cyber Surfr cable modems this year, snaring 60 percent of the cable modem market. In addition, last month it unveiled a long-awaited lineup of small digital cell phones and pagers aimed especially at the high end of the cell-phone market.
The consensus recommendation of analysts covering the stock of Motorola, though in a downward slide in recent months, remains a “buy,” according to the I/B/E/S International research firm. That includes five “strong buys,” 10 “buys” and 14 “holds.”
The company is expected to suffer a 76 percent decline in earnings this fiscal year, versus a 30 percent decline for the overall semiconductor industry. Next year’s projected 261 percent increase, however, compares to a 50 percent increase industrywide.
Cellular products make up 40 percent of Motorola sales, while semiconductors account for 24 percent. It also makes two-way radios, pagers, computers, electronic components and systems, and networking peripherals. This month it formed a specific division to provide services for Internet customers and users of mobile telephones.
Q–I follow your column faithfully. I have invested for my grandchildren in Neuberger & Berman Genesis Fund. Is it a good choice?
A–The $2.4 billion Neuberger & Berman Genesis Fund was closed to new investors in March because it had grown so dramatically in size over a short period of time, though it is still available to existing shareholders and through company 401(k) plans.
The fund declined 1 percent in value over the past 12 months to rank in the lowest quartile of small-capitalization value funds. That was due in part to a strong bet on oil services stocks, which subsequently declined in value, as well as the fact that the average small-cap fund was down for that period. Genesis’ three-year annualized return of 19.86 percent, however, placed it in the upper quartile of its category.
Co-portfolio managers Judith Vale and Robert D’Alelio look for small companies in relatively mundane industry niches that may be overlooked.
The fund’s biggest emphasis areas are utilities, banking, health care and oil services. Its top holdings were recently AAR Corp., Aptar Group Inc., Bank United, Webster Financial, Cordant Technologies, Trigon Healthcare, Alliant Techsystems, Dallas Semiconductor, Allied Group and United Stationers.
“I’m glad the fund was closed when it was, since it’s a good asset size for a small-cap value fund,” said Michael Stout, senior fund analyst with the Morningstar Mutual Funds investment advisory. “I certainly wouldn’t sell my shares, because you’re not going to be able to replace them with anything better since so many other comparable funds are also closed to new investors.”
Q–I have $127,000 in my individual retirement account. If I die before my wife, what are the rules about withdrawal or closing out of the funds?
A–You can name anyone you want as your IRA beneficiary, though you should always consider your entire estate when deciding how you’d like specific accounts distributed upon your death.
“Despite what some banks tell you, it’s probably not the best ides to name your spouse as the IRA beneficiary if you have sufficient other assets to leave the spouse,” suggested Ed Slott, certified public accountant and publisher of IRA Advisor newsletter. “Leaving it to a child or a grandchild with a longer life expectancy keeps the account growing over a longer period of time, and it will also receive estate tax protection you won’t get if you leave it to your spouse.”
There are several IRA withdrawal methods. The “recalculation” method determines the annual minimum distribution amount using the annually recalculated joint life expectancy of you and your spousal IRA beneficiary. The “term certain” method, generally more favorable, calculates the life expectancy only once–for the initial distribution, based on the sum of money you have in your account, divided by the actuarially determined number of years left in you and your beneficiary’s lives. There’s also a hybrid method that incorporates features of the two.
(A 12-month subscription to Ed Slot’s IRA Advisor, 100 Merrick Rd., Rockville Centre, New York, N.Y. 11570, costs $79.95. Toll-free number is 800-663-1340.)
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Andrew Leckey, a financial anchor on the CNBC cable television network, answers questions only through the column. Write “Successful Investing,” 76 N. Maple Ave., Suite 367, Ridgewood, N.J. 07450, or e-mail successinv@aol.com.
