Sector Snap: Cell Phone Makers
12.07.2007 17:26
Computers
- Source: Forbes
Motorola Inc.'s second-quarter warning barely nudged the cell phone maker's shares Thursday, though rivals such as Nokia Corp. climbed along with the broader market. Sony Ericsson, a joint venture between Sweden's LM Ericsson and Japan's Sony Corp. and the world's fourth-largest cell phone maker, posted solid second-quarter results and said its share of the mobile phone market grew 3 percentage points to above 9 percent. Motorola's weaker than-expected outlook backs "our view that the turnaround in the company's handset business will take several quarters and could extend into 2008," wrote Needham analyst Richard Valera in a note to investors, echoing the sentiment of other analysts. "That said, downside in the stock may be limited at current levels, supported by the company's strong balance sheet, aggressive stock buyback and modest...valuation," he added. In addition to its profit and sales warning that blamed poor results in Asia and Europe, Motorola said Wednesday it doesn't expect its cell phone business to be profitable until at least 2008. The company expects to ship about 35 million to 36 million handsets in the second quarter. That is about 8 million below what Standard & Poor's telecom equity analyst Todd Rosenbluth had estimated. He downgraded Motorola's stock to "Hold" from "Buy," Thursday, saying he has less confidence in the company's ability to turn itself around. Rosenbluth had already expected that the second quarter would prove challenging for Motorola, but he had been looking for a recovery of the company's cell phone segment in the second half of the year - and growth in 2008. "We need to see better execution from the company," he said. Mark McKechnie, an analyst with American Technology Research, attributed Motorola's weak quarter to company-specific problems as well as aggressive tactics by competitors to gain market share. Nonetheless, Rosenbluth noted, Motorola, the world's No. 2 mobile phone maker behind Nokia, still holds a market share of 14 percent. "They are still a key player in the space and are having success, just not as much as we had hoped and anticipated in the second quarter," he said. Motorola's shares slid 8 cents to $17.87. The stock is trading close to the low end of its 52-week range of $17.32 and $26.30. Espoo, Finland-based Nokia's American Depositary Shares rose 83 cents, or 2.9 percent, to $29.69. The stock hit a 52-week high of $29.77 earlier in the day. LM Ericsson's shares rose $1.40, or 3.4 percent, to $42.86. The stock hit a year-high of $42.98 earlier. ________ Questions or comments about this story should be directed to Associated Press reporter Barbara Ortutay at 212-621-7190. Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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