Motorola Reports -2: Balance Sheet Is Likely Focus >MOT
Unfortunately for Motorola, its own hard times come against the backdrop of
an economic slowdown, made even more acute because competitor Nokia Corp.
(NOK) dominates the handset market in Europe, which is not suffering as
severe a downturn as is the U.S.
Schlesinger believes Motorola's first quarter handset sales will show the
company is losing market share in the global mobile phone market.
"Overall, we expect the company's market share to decline in (the first
quarter) from the 14% plus level in the fourth quarter," he wrote in a
Tuesday note.
As far as global projections for both handsets and semiconductor sales,
analysts expect Motorola officials to clarify their cryptic February
projections, when the company said global handset sales would be below 500
million. In semiconductors, Schlesinger expects the company will reiterate
its full-year guidance of flat or decreasing global sales versus last year.
Wall Street will also pay close attention to the company's balance sheet and
cash flow trends.
Lehman Brothers wireless telecommunications equipment analyst Tim Luke
expects Motorola will focus on generating operating cash flows through
better management of its working capital.
The company has announced plans to cut more than 20,000 jobs from its work
force, and industry observers believe it may cut more.
"We believe that it may take a period of time for these initiatives to take
effect," Luke said.
And much of the concern surrounding Motorola centers on the company's debt.
Last week, Motorola denied that it might soon face a lack of cash, after
such speculation sent its stock tumbling by 23%.
Motorola's credit ratings were placed on the watch lists of major ratings
agencies for potential downgrade when it issued the Feb. 23 profit warning.
An analyst at Standard & Poor's told Dow Jones Newswires that a downgrade
based on a cash crunch isn't imminent.
That did not stop Merrill Lynch analyst Michael Ching from saying Tuesday
morning that it is likely Motorola's credit rating would be lowered, raising
its borrowing costs and shutting it out of the commercial paper market.
The company did not comment.
In the end, analysts don't expect Motorola's first quarter numbers or
guidance for the remainder of the year to do much to lift the stock.
"While we consider that at current levels Motorola may remain a longer-term
value play, we believe that it may take some time for momentum to improve in
both the handset and semiconductor arenas," Luke noted.
Shares of Motorola recently traded up 9.1%, or $1.06, to $12.56 with volume
at 26.7 million compared to the daily average of 14.3 million.
. -By Johnathan Burns,Dow Jones Newswires, 201-938-2020; |
