Thursday, March 15, 2007

Calls of Note Part 3

- CIBC notes that after a round of meetings in Asia with supply chain members, they believe Motorola (NYSE:MOT) is experiencing stronger than expected weakness in just about every area of its handset operation. Firm is lowering their 1Q07 handset shipment targets from 56M to 52M, reflecting a 20.9% QoQ decline.

They are growing increasingly skeptical of MOT's ability to deliver on its 2H07 double digit handset operating margin. Firm's checks suggest the SCLP could be delayed from late 1Q/early 2Q to late 2Q and they believe new 3G models are not expected to deliver in volume through 3Q07.

CIBC believes shipments could fall more than 20% sequentially with weakness across most areas. Checks show softness for the core RAZR and that newer products (KRZR and RIZR) are yet to gain traction. The low end is weak with MOTOFONE shipments possibly cut in half from 4Q06.

While they view Motorola s turnaround as a question of when and not if, they suggest investors don't wait for the fix as they believe it could take more than two to three quarters to materialize (at best). Firm is also unconvinced that Carl Icahn can make a material impact in the near term, which also limits the opportunity for near-term upside to the stock.

Adjusting 1Q07 estimates to revenue of $9.7B and earnings of $0.15 per share from $10.3B and $0.19. Maintains Sector Perfomer rating.

Notablecalls: Nothing really surprising here. Please see archives for further color on MOT.

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