Motorola: From bad to worse

Wall Street research house and investment bank Dresdner Kleinwort is forecasting the global handset sales for the first calendar quarter at 248 million, which would be a 17% decline from Q4 2006. The bank also predicts a slight decrease in the price per handset.

Of the large handset manufacturers, it appears that the joint venture Sony-Ericsson will do the best. It has marketed more expensive phones to the high-end market, an approach that still appears to be working.

Kleinwort's analysis is that Nokia Corp. (NYSE: NOK), LG and Samsung will have low single digit growth, while Motorola Inc.'s (NYSE: MOT) revenue will actually decline and it will lose its No.2 spot globally to Samsung.

The beatings will continue until moral improves at Motorola. After a poor fourth quarter in which margins dropped, the company said that the first quarter would be "challenging" as well. The tremendous success of its RAZR model is now behind it, and Motorola has not been able to come up with a "hot" phone product to replace it. Activist investor Carl Icahn continues to increase his ownership in the company, and a new CFO and president were recently put in place. Just to give the CEO a bit more heat.

Motorola's shares already trade near a 52-week low at $17.72. The shares were over $26 last October.

One theory is that the bad news about the early part of 2007 is priced into the stock. But that school of thought could well be wrong. If Motorola does start to drop well behind the competition in terms of unit sales growth, the shares could move back toward $15, where they were two years ago.

Douglas A. McIntyre is a partner at 24/7 Wall St.