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Friday, September 15, 2006

Analyzing Products & Profits- Mcdonalds & Motorola

By Yaser Anwar, CSC of Equity Investment Ideas

In the first eight months of 06, same-store sales increased, YOY, 4.7% in the US & 5.3% worldwide. Results benefited from customer acceptance of new premium chicken sandwiches and extended hours of service at McDonald's stores.

Investors should expect the the rollout of new premium salad offerings and snack wraps to help sustain same-store sales momentum through 06. Look for a more value-driven menu to improve sales performance in Europe.

S&P projects revenue growth of 6% in 06, reflecting same-store sales growth of about 5.0%, and international expansion.

06 results will benefit from lower food prices, well controlled corporate costs, reduced interest expense due to a lower debt balance, and share repurchases, partly offset by higher labor and utility costs.

Following an 18% sales increase in 05, expect sales to rise in the mid-teens over the next two years, as MOT's leading businesses in mobile devices and homeland security systems supporting growth.

MOT's first half mobile device sales advanced 45% YOY & represented 2/3rds of total sales.

For 06, analysts forecast that the handset unit will realize a 33% sales advance, but do not see growth above 5% to 7% for its telecom networks and enterprise and connected home solutions units.

I believe gross margins for 2006 and 2007 in the 31%-32% range.

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