Strong Handset Market Lifts Motorola, Nokia
Bear Stearns analyst Phil Cusick upgraded his rating on Motorola to “outperform” and maintained that rating for Nokia, citing strong handset growth that should continue to drive sales at both companies through the end of the year.
“We believe the handset market in 2006 is stronger than expected driven by emerging markets and solid trends in some of the mature markets like Western Europe and China,” the analyst wrote in a Wednesday report.
Cusick raised his global first-quarter units’ estimate to 215.1 million, a 26% increase from this time last year. His full-year 2006 estimate increased to 918 million units from 887 million units.
Cusick says Motorola (nyse: MOT) increased its market share to 18.6% of the handset market, supported by strong branding, marketing and product design.
One of the biggest risks to Cusick’s Motorola estimates, he says, are margin challenges related to the emerging market handset business in Asia and the Middle East. But he remains confident in the company’s operating margin, which continues to grow after an 11.8% increase to 140 basis points in 2005. He adds that strong volume growth and a continued focus on its supply chain should help Motorola meet its long-term operating margin target of 13% to 15% beyond 2007.
Nokia (nyse: NOK)’s margins also look good over the next eighteen months, Cusick reports, and the company should continue to regain share at the mid-tier in North and South America, and at the high-end in Europe and other markets. The analyst also says Nokia should see 17% unit growth through 2006 driven by European upgrades and China’s first major replacement cycle.
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