Wireless' Comeback Might Be a Bit Premature
By Tish Williams
Senior Writer
5/25/01 4:26 PM ET
Some of the biggest wireless names are getting too rich for Wall Street's blood.
On Friday, Deutsche Banc Alex. Brown balked after taking a good look in the wireless channel. It didn't like what it saw and slashed revenue and earnings estimates for Motorola (MOT:NYSE - news) and Qualcomm (QCOM:Nasdaq - news).
Analyst Brian Modoff reported his understanding that Sprint PCS (PCS:NYSE - news) and Verizon (VZ:NYSE - news) are canceling cell-phone orders, and opined that "things out there remain ugly and they are not getting any better."
Wireless stocks have staged a mighty comeback since handset manufacturers warned about poor January quarter results and cut their estimates for 2001 handheld sales. Industry darling Nokia (NOK:NYSE ADR - news) is up 52% since April 3, along with technology provider Qualcomm's stunning 59% gain in the same period. Even laggards Ericsson (ERICY:Nasdaq ADR - news) (up 40%) and Motorola (up 41%) have enjoyed positive market moves since early April despite the continued softness of handset sales and confusion around customer rollout plans on the wireless-equipment side of their businesses.
DB Alex. Brown docked its numbers for Motorola's second quarter from a 12-cent loss to a 15-cent loss with $409 million less in revenue to $7.67 billion. The firm's new stance is conservative in comparison with consensus estimates for Motorola's second quarter of a 12-cent loss and $8 billion in revenue, according to Multex.com. Noting that Motorola expects an October/November pickup, Modoff nonetheless doubled his loss expectations for fiscal 2001 from 11 cents a share to 22 cents a share, cutting more than $1 billion from the revenue line at a newly pegged $32.7 billion.
Qualcomm got similar treatment, with Modoff lowering his sights from a 20-cent third quarter to 19 cents on $580.1 million in revenue. He lopped 4 cents off his 2001 marks for a 98-cent earnings-per-share estimate. While Motorola took it on the chin for GSM equipment and Qualcomm took its medicine for perceived CDMA weakness, DB Alex. Brown cut Powerwave (PWAV:Nasdaq - news) estimates based on slow current-generation wireless equipment.
In the damned-if-you-do, damned-if-you-don't category, DB Alex. Brown believes Powerwave's next-generation product sales are on track, but dinged DMC Stratex (STXN:Nasdaq - news) because its next-generation products aren't expected to pay off quickly enough to help this quarter.
In recent trading, most of the stocks were drifting downward. Qualcomm was off $2.11, or 3%, to $67.89. Nokia and Motorola both were down 2.9%, Ericsson was off 1.6%, Powerwave was only down 0.2% and Stratex was slightly higher by 1.2%.
The report counsels wireless investors to be prepared for a second quarter of earnings warnings. With a week's worth of pesky handset news backed up behind the report, some of those late-spring gains may be at risk.
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