Motorola misses handset target by a mile
Poor sales of mobile handsets, particularly in Asia and Europe, will see Motorola miss its latest sales target by around $750 million.
The giant US corporation, which had already cut its sales estimate dramatically for the second fiscal quarter of 2007 (see related story), now expects total revenue to come in at around $8.65 billion rather than $9.4 billion.
"The shortfall is primarily attributable to lower overall unit volumes in the mobile devices business in Asia and Europe," stated the company, adding that it no longer expects its handset business to be profitable in 2007.
Motorola said that it will have shipped between 35 million and 36 million handsets during the latest quarter, which Morgan Stanley analyst Aaron Husock estimates to be 13 percent fewer than previously expected.
As the world s second-biggest mobile phone vendor (behind Nokia), Motorola s shortfall will impact component vendors, including transceiver chip and GaAs power amplifier suppliers like RF Micro Devices, Skyworks Solutions, TriQuint Semiconductor and Anadigics.
The good news is that Motorola s weakness does not appear to be an industry-wide malaise, with various analyst companies still predicting robust overall growth of the mobile handset market this year.
Husock reckons that RFMD is the most exposed to Motorola's weakness, since it accounts for approximately one-third of the Greensboro, North Carolina, company's sales.
"We see further downside to consensus estimates for RFMD in the third calendar quarter of 2007 and beyond as transceiver sales [to Motorola] disappoint and Motorola shifts its procurement towards single-chip baseband/transceivers and away from RFMD," said the analyst.
The impact will also be felt at Skyworks, although Husock says that this will be mitigated by better-than-expected phone sales at Sony-Ericsson and Samsung, as well as Skyworks design win in Apple's new iPhone.
Motorola is set to reveal more details about its finances and its future strategy over the next few weeks. In the mean time, it has appointed supply chain specialist Stu Reed as the new president of its mobile device business, likely with a view to cutting the cost of making its phones.
But if Reed is unable to return the business to profit, then there would be appear to be serious a question mark hanging over Motorola s continued presence in the sector.
