Thursday, December 2, 2010 ET
Motorola: Street Anxious But Hopeful On Jha’s Outlook
By Tiernan Ray
Motorola (MOT), which is splitting into two companies come January, offered the first glimpse last night of what that might look like. Sanjay Jha, head of Moto’s Mobility unit, which makes handsets (”Droids”) and home networking/multimedia products, last night addressed the audience at Credit Suisse’s tech conference in Phoenix, Arizona.
Moto shares are down a penny at $7.99 this afternoon.
Jha told the crowd the newly separate Moto Mobility will have 16,500 patents covering computing, media, Internet and wireless devices, no debt, and no pension liability. Moto has one of the most exciting opportunities, he said, in the convergence of media, computing, the Internet and wireless. He said the company was on track to ship “at the high end” of a forecast of 12 million to 14 million smartphones this year, out of the company’s total 30 to 40 million handset shipments.
(O! How the mighty have fallen: that 14 million smartphones is as many as Apple (AAPL) may ship this quarter!)
Jha forecast a seasonal decline of 7% to 10% in Q1 of next year, though the Street is looking for much worse, on the order of 20% or so.
Nevertheless, there appear to be general positive views today of his talk:
Ittai Kidron, Oppenheimer & Co.: Reiterates an Outperform rating on the shares and a $10 price target, writing that Motorola has “done a good job securing a good balance of promotions with carriers, new product slots at new carriers, and potential new carrier customers.” Kidron is looking for an LTE device on Verizon’s (VZ) new high-speed network, dubbed the “Etna,” and a “potential 10? tablet” in 2011.
Those new devices might bring the company’s shipment decline in Q1 closer to the 10% Jha is talking about, whereas Kidron has been expecting a drop of 18.8%.
Mark McKechnie, Gleacher & Co.: Reiterates a Buy rating on the shares and a $10 price target. McKechnie continues to believe Moto’s handset group can offset the onslaught of the Apple (AAPL) iPhone coming to Verizon (VZ) by expanding with AT&T (T), Deutsche Telekom’s (DT) T-Mobile, Sprint Nextel (S), and overeas, particularly China, Europe, and Latin America.
However, he also sees the VZ iPhone not only eating into units — Moto’s Q1 units will probably be down 20%, quarter over quarter, he argues — but also margins: he’s slicing his handset loss to a negative 3% gross margin from a negative 1.5%.
Hence, McKechnie cut his Q1 forecast to 7 cents per share from 8 cents, on the same revenue estimate, $4.6 billion, as he sees a deeper loss in the handset business than previously expected.
Previously: RIMM, MOT: Missing The Smartphone Opportunity, Says Nomura, December 2nd, 2010.
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