The Nokia story it seems to me is worth repeating and highlighting.
<<09:40 am Nokia (NOK)
21.30 +1.08: Shares in handset manufacturers and related component companies are rising after Nokia raised its 2006 forecast for handset market growth. The world's largest maker of mobile phones dialed up its growth estimate for the global handset market to 15% or more, from 10%. The revision came from CEO Jorma Ollila who was speaking at the company's annual shareholders meeting in Helsinki today.
Economic development is accelerating in the emerging markets and generating demand for handsets. Penetration rates remain well below global averages, offering a considerable growth opportunity for mobile phone manufacturers. According to Ollila, half of the mobile phones sold this year will come from developing countries. NOK predicts 80% of the next billion mobile subscribers will come from markets like India and China.
Motorola's (MOT) CEO Edward Zander has relayed a similar message, stating that emerging market growth rates will surprise to the upside. The general concern, however, has been that accelerating demand of lower priced phones will weigh on margins. To date Motorola, in particular, has been able to balance this volume-based market opportunity with higher-priced, multi-functional, and addictively stylish thin line phones, including the widely successful RAZR.
The handset manufacturers are coming off a strong 2005 and Nokia's announcement today sets up growth expectations for 2006. Nokia recently unveiled several new phones in China which cost as little as $54.00 (45 euros) targeted at first-time users, according to the company. This most likely will not be the last time we hear good news coming out of the handset industry. We currently have an Overweight rating on technology, which includes a positive outlook on the communication-related markets.
Separately, we maintain our positive view on Motorola due to its continued market share gains, rising ASPs, margin expansion, and accelerating earnings. The stock is trading at a forward multiple of 17.5x, on par with Nokia at 17.6x, but well below its 5-year historical average of 34.7x.
--Kimberly DuBord, Briefing.com>> |
