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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: foundation who wrote (6861)	8/4/2000 10:41:00 AM
From: Ruffian	Respond to of 34857

What's Going On With Cell Phones By Arik Hesseldahl Perhaps it simply seems too good to be true. How could any one sector look quite as promising as cellular phone handsets have in the last year or two? Whatever the reason, the fact is that investors and financial analysts have been expressing concern over the future of the cell phone business. The most recent case in point was word from an analyst at Lehman Brothers that Motorola (NYSE: MOT - news), the world's second-largest maker of mobile phone handsets, would not meet a shipment goal of 100 million units this year. Investors reacted quickly, knocking off as much as $3 from Motorola's share price on Thursday from Wednesday's close, making it among the top three most-traded stocks of the day. The only thing that cooled investor fervor was a statement from Motorola that it never really expected to sell 100 million handsets but had always expected to ship between 80 million and 85 million units. That helped Motorola stock recover some of its lost ground and it closed at $36.06. But it's just the latest indication of continuing skittishness among investors with stock in mobile phone companies despite a continuing boom in that market. Finnish phone maker Nokia (NYSE: NOK - news) warned that its third-quarter sales may be weaker than expected. Before that Sweden's Ericsson (Nasdaq: ERICY - news) said much the same thing. While the overall handset market may look rosy, it's also getting more competitive. Market research firm Strategis Group of Washington, D.C., expects worldwide sales to grow from 338 million this year to more than 544 million by 2007. And though the market has been dominated to date by Nokia, Motorola and Ericsson, two Korean entries--LG Electronics and Samsung--are beginning to aggressively go after market share. LG, for example, recently landed a contract, through its LG InfoComm USA subsidiary, to sell more than $150 million worth of a new model of a Web-capable phone to Sprint PCS (NYSE: PCS - news). Samsung is also marketing a new model aggressively to European mobile service providers. Meanwhile, cell phones are hitting an evolutionary phase, when new Internet-based functions are going to become more common, using both Wireless Applications Protocol (WAP) and General Packet Radio Service (GPRS), something Motorola in particular is in a strong position to exploit. Ray Jodoin, an analyst with market research firm Cahners In-Stat, Scottsdale, Ariz., says that Motorola is likely to be the first to market with a GPRS phone, which will allow faster data rates over existing infrastructure. ``They have a phone that works well that is going through final approvals right now, which is likely to be a big boom for them,'' Jodoin says. But Motorola has also been paying less attention to the lower end of the European mobile phone market, Jodoin says, in favor of selling higher-end phones with more features and higher margins. ``Between 35% and 45% of the new customers in Europe are signing up for prepaid plans using lower-end phones,'' Jodoin says. ``By paying less attention to that segment of the market, they are going to see some impact in volume.'' But that makes sense given the current supply situation, Jodoin says. Phone manufacturers have had to contend with persistent parts shortages, particularly in the areas of flash memory and other semiconductor and passive electronic components used to make the phones. In order to deal with it, manufacturers are likely to push their limited supply of parts toward the more expensive phones. Motorola in particular has been trying to push the margin of its handset business above 10%. ``It's like having a shortage of tires,'' Jodoin says. ``Do you sell them to Chevrolet or to Cadillac?'' Go to www.forbes.com to see all of our latest stories.