Has MOT taken top spot from Finland's Nokia?
Motorola Earnings to Show Impact of Promotions
Sat January 18, 2003 07:01 AM ET
By Yukari Iwatani
CHICAGO (Reuters) - Analysts will be watching Motorola Inc.'s MOT.N fourth-quarter results closely next week to see if a big push in the United States to regain No. 1 market share in mobile phones during the holiday season will hit its profitability.
While no one yet knows whether the world's second-largest mobile phone maker took the top spot from Finland's Nokia NOK1V.HE NOK.N , analysts believe the Chicago-area based company is on the brink of doing so if it hasn't already.
Such a coup would be significant for a company that lost its dominant global market share position to Nokia four years ago, but analysts are worried Motorola sacrificed profits. They believe demand for Motorola phones jumped due to unbeatable phone deals through the nation's largest wireless telephone company, Verizon Wireless.
"If they're giving all the phones away, you can have No. 1 market share, but if you can't make money from them what's the use?" asked Alex Vallecillo, senior portfolio manager for Armada Funds.
Verizon Wireless, a joint venture between Verizon Communications VZ.N and Britain's Vodafone Group Plc VOD.L Plc, expects its gain in subscribers to be one of the largest in the industry, adding more than the 803,000 net new customers in the third quarter.
Many of those customers are seen to have taken advantage of generous Motorola rebates that allowed them to obtain a $300 phone for as little as $50.
According to Gartner Dataquest, Motorola had 26.2 percent market share in North America at the end of the third quarter last year compared with Nokia's 32 percent. The research firm does not provide a breakdown for just the United States.
BACKBONE OF THE COMPANY
Analysts acknowledge regaining the top position in one of the world's largest markets would be positive for the company that invented cell phones, but that doesn't lessen their concerns. Motorola's mobile phone unit is the backbone of the company, contributing more than 40 percent of sales in the most recent quarter.
"The handset business is the profitable part of the business that's really driving (Motorola) and that needs to stay intact for Motorola to work," Vallecillo said.
Brian Modoff, wireless equipment analyst with Deutsche Bank Securities, said he was also concerned that Motorola's discounts were eroding the value of mobile phones for all players in the industry.
"You're conditioning the consumer to expect to have to only pay that (little) for the phones," said Modoff, who does not own any Motorola shares. "You're not teaching the consumer there's actual value in these devices worth paying for. I don't like that."
Overall, analysts on average expect Motorola, which also sells semiconductors, wireless network equipment and television settop boxes, to post a profit of 10 cents a share, according to Thomson First Call.
This matches the company's guidance of 10 cents a share on revenue of $7.1 billion. In the year-earlier period, Motorola posted an operating loss of $90 million or 4 cents a share.
Nokia will report results on Jan. 23 and Ericsson ERICb.ST ERICY.O , the world's largest maker of wireless network equipment, will report on Feb. 3.
Along with Nokia and Ericsson, Motorola has suffered from a slowdown in demand for mobile phones and wireless network equipment over the last 18 months. Meanwhile the weak economy has hurt the company's automotive electronics, semiconductor and broadband businesses.
Since August 2000, Motorola has slashed its workforce by nearly 40 percent from a peak of 150,000. It plans to have 93,000 employees by mid-2003. |
