Tuesday, January 4, 2011

FBR Talks Home Depot (NYSE:HD), Motorola (NYSE:MOT) "First Phone"

A number of investors have been wondering how the "First Phone" deal by Motorola (NYSE:MOT) with Home Depot (NYSE:HD) is working out.

FBR Capital responded saying, "Investors have asked about HD's Motorola "First Phone", the mobile handheld device unveiled to us officially at its 12/8 analyst day. We further discussed this initiative with corporate, and observers can witness this device being used in stores. There are 14 devices per store on average. These handhelds do not leave the premises (not functional outside of the store, for proprietary reasons). They also require a user code, with access permitted by authorized employees: store managers, department supervisors (there are 13 departments), District Managers and Regional Managers (RMMs). The device is versatile, with 6 primary functions: 1) phone, 2) walkie-talkie, 3) ordering device, thereby replacing the old mobile cart: aka “R2D2”, 4) mobile register (a la the Apple Store), 5) store "look-up" (locate product within the store, or another store location), and 6) real time financial and merchandising information for "store walks" by management: store, department and SKU level P&Ls. Formerly, many of these tasks were accomplished with a heavy paper trail and leveraged gut instinct of veteran managers. In terms of the mobile register, customers were checked out this past Black Friday for the first time using plastic cards (like gift cards) for pre- tallied receipts at the register. The next evolution is for receipts to be printed out using a supplemental mobile printer at the First Phone point of purchase. HD is in the process of executing the mobile register portion methodically, in order to manage loss prevention. It is expected to be more functional during this upcoming lawn and garden/outdoor season in 1H11E. The use of mobile devices in general is not new to other retailers, but it is for Home Depot, who in the past has lagged peers in technology. Marvin Ellison, EVP US Stores, has made the device a requirement, and we suspect that these types of initiatives, amongst other things, are helping to drive premium U.S. store comps for HD vs. its peer (6 of last 8 quarters)."

FBR has an "Outperform" rating on Home Depot, which was trading at $34.99, falling $0.33, or 0.92 percent, as of 12:02 PM EST.

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