Monday, May 14, 2007

Motorola (NYSE:MOT): Mid-quarter checks suggest some stabilization

- CIBC comments on Motorola (NYSE:MOT) saying their mid-quarter checks suggests MOT has managed to stabilize its handset market share in most regions, yet in Asia inventories remain high and continue to make an impact on sell-in. Given Asia's impact on MOT, they are lowering their shipments target in 2Q07 to 44.5M (-2% QoQ) from 46M.

Firm notes they have seen evidence of two trends that illustrate the progress MOT is making internally to address its issues. Adoption of a firm global pricing policy (and adhering to it). A shake up in the global distribution system, reducing arbitrage activity and forcing regional sell-through disciplines.

MOT will host an event on May 15 in which it will show a mix of already introduced models and new models, including new derivatives of the MOTOFONE and a new slick RAZR-like clamshell. CIBC expects features to still be light, and would keep expectations low. Looks for late '07 for change.

The firm is tweaking their estimates to reflect more near-term sell-in challenges. For 2Q07, they are slightly reducing revenue estimate to $9.2 billion from $9.4 billion. Pro forma EPS estimate is unchanged at $0.04. They are looking for a clear turn and new 3G models before turning more positive.

Notablecalls: Nice comments by CIBC's Ittai Kidron. Zander and his team are trying to fix the problems ailing MOT's largest division - the mobile. While the pricing and distrubution system are important, I think what investors really want to hear is that the mobile poducts development labs are working feverishly to come up with new and cool products. There has been some ga-ga over the RIZR R8 lately but looking at the looks like all the other phones out there.

The stock is starting to look good. In fact, it looks like it cleared the 50 day EMA on Friday. The last time MOT closed above this average was in October 2006. I continue to stand by my bullish thesis on MOT.

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