SCHAUMBURG, Ill.—Earlier this week Motorola Inc. hedged the value of the 37.6 million shares of Sprint Nextel Corp. it owns, which represent about 1.25 percent of Sprint Nextel’s stock.
Hedging allows Motorola to maintain the stock’s current value and participate in a portion of the stock’s growth in value over the next several years, while protecting it from possible downturns in stock value.
Motorola has been the sole supplier of Sprint Nextel’s iDEN handsets and core iDEN network infrastructure for a decade, and currently operates under a supply agreement for these products through December 2007. Its ownership of Sprint Nextel stock is an investment supported by its close relationship with the carrier.
“Motorola has a number of technology investments in related companies and the value of those investments is subject to market fluctuations,” said Motorola spokesperson Jennifer Weyrauch. “So from time to time, we hedge our investments as we deem appropriate. Given the recent appreciation of Sprint’s stock price, we decided to enter into this hedge. We continue to have great confidence in the ongoing success of the Motorola-Sprint relationship.”
Motorola sold off a significant portion of its stock in Nextel Communications Inc. prior to the carrier’s acquisition by Sprint Corp. last year. Motorola said it scored an after-tax gain of $780 million during the third quarter of last year following Nextel’s acquisition by Sprint, and that it received 69.3 million shares of the newly combined carrier and $46.3 million in cash in exchange for its 54.7 million shares in Nextel.
Sprint Nextel’s stock was trading up slightly at $24.91 per share after the news.
