Mobile phone makers eye wireless Internet opportunity 2001-11-26
********GPRS the forerunner- LOL*****lukewarm reception must be realted to burnt hands.....
Companies look past current troubles toward growing the mobile data market
by John Filar Atwood, equity research columnist
Worsening economic conditions have caused a major strategic shift in the mobile handset industry. The segment’s top companies have begun to de-emphasize phone sales and are eyeing the wireless Internet as a key driver of future revenues.
It’s no surprise given recent industry performance. Third quarter handset shipments were down by 10% over last year. Motorola’s (MOT) sales fell by 22% in the quarter, and Ericsson’s (ERICY) phone operations have been so damaging to its bottom line that the company finally moved them into a joint venture with Sony (SNE).
Also disappointing has been consumers’ reluctance to embrace mobile data services. General packet radio service networks, the forerunner of the highly touted third generation networks, have gotten an unexpectedly lukewarm reception from users.
To combat these trends, phone makers Nokia (NOK), ERICY and MOT have joined with wireless carriers to commit to promoting open architectures in the mobile data area. The initiative is critical to the development of widespread interoperability, the key to achieving mass-market appeal of the wireless Internet.
The recent agreement is a commitment to the future of mobile data services. Companies will not see any significant market penetration until truly open standards are in effect.
As a result, NOK, ERICY and MOT may still be troubled by near-term conditions like softening demand and increasing dependence on replacement sales. However, analysts are becoming more optimistic about these companies' medium- and long-term prospects.
Analysts at Lehman Brothers rate NOK a "buy" despite their belief that the uncertainty in the handset market will continue through the first half of 2002.
In a November 12 report, they applaud the company’s new software licensing initiative that is part of the move to open mobile data standards. They believe that the creation of open standards will help develop the wireless data and infrastructure markets, as well as boost handset sales.
Merrill Lynch’s analysts also like NOK’s decision to license its middleware to competing handset manufacturers. They say in a November 13 report that the move will have no impact on near-term numbers, but reaffirms their belief that the company is taking its mobile data business to a new level.
The open architecture agreement has not changed Morningstar’s recommendation that investors avoid MOT shares. In a November 16 report, the analyst still warns of weakening fundamentals and the poor quality of MOT’s earnings. However, Crowell Weedon analysts list MOT among their outperformers, and say in a November 12 report that the stock looks very attractive at $15.
Analysts at Robertson Stephens rate ERICY "market perform" on the belief that the company will remain a market share leader in wireless network equipment. However, they warn in a November 9 report that the infrastructure market is in for three more tough quarters. They suggest investors wait for a late 2002 rebound before buying ERICY shares. |
