Sprint Nextel Corp. (NYSE: S) has taken the next step to delete more costs from its bottom line by sending the management of its nationwide wireless network to Sweden's Ericsson. The deal -- valued at up to $5 billion -- will allow Sprint to offset its declining subscriber revenue and numbers with lowered costs.

LM Ericsson (NASDAQ: ERIC - option chain) stock is falling today after Sony Ericsson, the joint venture between Sony (NYSE: SNE) and ERIC, forecast continued weak mobile phone handset sales. Things are so bad that they expect to ship only half the phones this quarter that they did last, but keep in mind last wuarter included the holiday season. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ERIC.

This morning, ERIC opened at $8.44. So far today the stock has hit a low of $8.22 and a high of $8.53. As of 11:50, ERIC is trading at $8.31, down 99 cents (-10.7%). The chart for ERIC looks neutral and S&P gives ERIC a 3 STARS (out of 5) hold ranking.

Motorola's (NYSE: MOT) share of global handset sales has fallen from about 22% three years ago to 12%. Its cell phone division revenue is dropping at a rate of over 30% and loses money ever quarter.

For Motorola to break back into the black, it not only needed to launch new products to pick up market share, but it also needed the worldwide handset business to stay healthy. No such luck.

According to Reuters, "South Korean mobile phone makers Samsung Electronics and LG Electronics have cut their 2009 sales targets as a global downturn spreads." By most accounts these companies and other large manufacturers like Sony Ericsson and Nokia (NYSE: NOK) have the financial resource to weather a tough year or two. Not so at Motorola.

Motorola had planned to spin off its handset unit, but that has been delayed. The company's other businesses are profitable, so the cell phone business is dragging them down. MOT shares are off 75% this year to just over $4.

As hard as it would have been to imagine a year ago, Motorola may still have to dump its cell operation and perhaps put it into Chapter 11. Its fate is that grim. It needs to escape its employee and creditor obligations to make it.

Douglas A. McIntyre is an editor at 247wallst.com.

Sweden's Ericsson LM TEL Co. (NASDAQ: ERIC) said this morning that it saw a 70% nosedive in profits for its second quarter due to R&D costs as well as activity related to recent acquisitions. Ericsson also commented that its primary business -- mobile equipment and infrastructure -- will likely experience a "flattish" market in 2008.

That didn't sit well with investors, who sank the stock over 5% in Stockholm where the company's shares are traded. The company's ADS price as of this afternoon was hovering right over $11.06 per share, even though the company did see a smallish sales gain of 2% year-over-year. The problem is that its profit was down to $320 million for the quarter compared to over $1 billion during the year-ago quarter.

One of the more interesting twists came from Ericsson's joint partnership in Sony Ericsson, the mobile phone handset company that had a great comeback in the 2005 to 2007 time frame but has seen sales drop sharply in 2008. In fact, Sony Ericsson saw a 97% drop in its recent Q2 earnings due to the company's inability to ship lower-end handsets to the hot mobile phone markets. As a result, Nokia Corp. (NYSE: NOK), was in all the right places to take the market share Sony Ericsson missed by being absent in that space.

Sony Ericsson, a joint venture between Sony Corporation (NYSE: SNE) and Sweden-based Ericsson Telecommunications Co. (NASDAQ: ERIC), announced to Billboard Wednesday that the company would be incorporating AM/FM radio features into selected new devices and phones before the end of the year. Designed for global markets, the R300 Radio and R306 Radio phones will be launched in South America first with hopes that the specific AM capability will spur emerging markets and consumer interests in sporting events and listening to music.

According to Billboard, the new phones resemble transistor radios but are not equipped "to allow users to download tracks from the radio but do have a feature that identifies the song and artist played." Sony Ericsson's marketing VP for South America, Stephan Croix, told the trade paper the devices are part of "a very simple and straightforward concept that will make music more relevant in the mass market," as opposed to more sophisticated technology like Apple Inc. (NASDAQ: AAPL)'s iPhone that merges music capabilities with phone and Internet functions.

Sony Ericsson recently issued a second profit warning for 2008, hoping to recover in the second quarter after falling behind rival South Korea-based LG Electronics in the first quarter. The warning points to declining European sales, which could indicate why the new radio/phone devices are being pushed in South American markets, in addition to the obvious reasons outlined above. The company is also hoping for a massive resurgence in quarter three with the launch of the new Xperia X1 handset in September. The release of the iPhone and how it performs after this week will only add to complications and competition Sony Ericsson may have before the radio/phones are released regionally and later globally.

Motorola (NYSE: MOT) is getting close to picking a CEO for its handset division. The operation is going to be spun-out next year. Its worldwide share of the cell phone business has fallen from 22% to about 10% over the last two years.

The CEO search may be one of those odd situations where a chimpanzee may be as good as a man.

According to The Wall Street Journal, "Chief Executive Greg Brown is desperate to find a manager to turn around Motorola's mobile-devices division, which has lost $1.6 billion since January 2007, when its hit Razr phone ran out of steam." But, can new management do what two previous generations of managers at Motorola could not do? The company has been effectively flanked by the world's largest handset company, Nokia (NYSE: NOK), along with Samsung and Sony Ericsson. Getting back any market share may be hard for Motorola.

The spin-off also raises the issue of how the new unit will find capital. It will need at least $2 billion to $3 billion in cash. For a failing company, that may be hard to come by.

Motorola now trades at $9. Its enterprise and home electronics divisions could be worth as much as its $20 billion market cap. That leaves the handset unit with a value of zero.

Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 newsletter.

Part of Motorola's (NYSE: MOT) strategy in spinning off its weak handset unit is the hope of finding a buyer. The business lost over $1 billion last year on revenue of $19 billion. This year, with unit sales still dropping, those numbers will get worse.

So far, no one has stepped up with an offer. Firms like Nokia (NYSE: NOK), Samsung, and Sony Ericsson may be better off watching the US handset maker bleed to death. That takes away much of the incentive of being a buyer.

Yesterday, China's Huawei Technologies, a huge handset maker in the big Asian country, said it had no interest in Motorola. According to Reuters, "Huawei said it was not interested in buying the business as it is focused on selling its phones under the brand of its mobile operator customers, while Motorola sells phones to consumers under its own brand."

At $9.47, Motorola still trades near a 52-week low, despite plans to break the company into two pieces. That gives the company a market cap of $21 billion. The firm's home mobility and enterprise systems divisions are profitable. That means the handset division is worth very little.

Motorola can't even give it away.

Douglas A. McIntyre is an editor at 247wallst.com.

Shares of chip maker Texas Instruments Inc. (NYSE: TXN) have been falling this morning after the company cut its first-quarter sales and earnings outlook last night.

Texas Instruments blamed one of its key customers as it decided to slash orders. The only clue about this mysterious customer, whose name wasn't disclosed by the company, was that is a maker of wireless phones. Texas Instruments now expects first-quarter earning in a range between 41 cents and 45 cents per share, which is below analysts' predictions for quarterly profit of 46 cents per share. The company had previously predicted earnings of 43 cents to 49 cents.

Looking at revenue, the company forecast sales in a range between $3.21 billion and $3.35 billion, compared with its previous range of $3.27 billion to $3.55 billion. Its predictions were again below analysts' estimates of $3.40 billion, according to Thomson Financial.

MAJOR PAPERS:

• A slowdown in growth in the telecommunications equipment industry may result in a joint venture between Motorola Inc (NYSE: MOT) and Nortel Networks Corporation (NYSE: NT), that would have combined sales of about $10B, the Wall Street Journal reported.
• The Wall Street Journal also reported that Yahoo! Inc's (NASDAQ: YHOO) board is planning to reject the Microsoft Corporation (NASDAQ: MSFT) bid of $31 per share, feeling that Microsoft would be taking advantage of a deteriorated Yahoo! share price. Sources said Yahoo! will not consider any offer under $40 per share.
• Sony Ericsson, a joint venture between Sony Corporation (NYSE: SNE) and LM Ericsson Telephone Company (NASDAQ: ERIC), admitted that its business is weak in India, China, and the U.S. The joint venture has designated those three countries as priorities, the Financial Times reported.

WEB SITES:

• According to a source, the Silicon Alley Insider reported that Yahoo! is expected to let go 1,000 employees or more during the week of February 12.
• SiliconValleyWatcher "heard" from a very reliable source that Salesforce.com Inc (NYSE: CRM) has approached Oracle Corporation (NASDAQ: ORCL) over a potential sale of itself for $75 per share.

It's really sad that a wireless giant like Motorola, Inc. (NYSE: MOT), who invented the radio technology used heavily in World War II and helped invent the consumer cellular business more than 20 years ago, could have fallen into such disrepair. It's so bad that it may be a hard search to find a company to buy the handset maker's faltering handset division. LG Electronics' spokesperson Joh Joong Kwon even said "We are not interested in buying Motorola's handset business ... we believe it is better for us to focus on our resources to grow on our own."

Remember, this is the part of Motorola responsible for trend-setting hits like the StarTac and the RAZR. It's hard to imagine how a seasoned leader like former CEO Ed Zander (mis)managed to completely fail in his attempt to keep the cellphone giant at the top of its game. After quarters of huge losses and a product portfolio that spent all of 2007 losing market share, Motorola's just not near what it used to be. And, buyers are not coming out of the woodwork looking to buy its cellphone business.

After nearly two years of falling market share in the mobile handset business, Motorola (NYSE: MOT)'s board today said that is would explore selling or otherwise disposing of its largest unit. "We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise," Chief Executive Greg Brown said in the company's statement.

Motorola's popular Razr model lifted its global share to about 22%, but that was two years ago. In the latest quarter, the company only shipped 40 million handsets, about 12% of the market. The US company has been handed a beating by Nokia (NYSE: NOK), Samsung, and Sony Ericsson.

Without handsets, Motorola would be a much smaller but more profitable business. Its set-top box, enterprise, and government telecom operations all make money.

It would have been nice to sell-off the cell phone operation when it had some real value. Now, it is too late for that.

Douglas A. McIntyre is an editor at 247wallst.com.

Sony-Ericsson, the fourth-largest handset company, has announced it will open its own music store for consumers who buy its handsets. According to MarketWatch, the service "will be available in 30 countries worldwide by the end of 2008, starting from May. It will offer more than 5 million music tracks."

With Nokia (NYSE: NOK) and Apple (NYSE: AAPL) already in the same business, it is hard to see how the new Sony-Ericsson initiative will find customers. A number of cellular carriers have services of their own, which means that they compete with their own handset suppliers. Companies outside of the cellular business have also created music download stores for portable devices. The most notable new player in that market is Amazon (NASDAQ: AMZN).

The multitude of download services is not likely to make those getting in late much money. And having so many services in the market will confuse the consumer.

Douglas A. McIntyre is an editor at 247wallst.com.

Handset maker Sony Ericsson beat analysts' estimates for the fourth quarter of 2007 and said that the company is gaining market share. In a surprising development, the company said, "The average sales price (ASP) of its mobile phones, a key indicator for profitability, rose to 123 euros from 120 euros in the third quarter," according to Reuters.

The company's share of the global handset market is now close to 10%. Units shipped in the quarter reached 30.8 million, an 18% increase from a year earlier.

The news may be good for Motorola (NYSE: MOT) and Nokia (NYSE: NOK). Even if the economy is slowing, consumers may be willing to spend $200 for a new phone. Increasing business in regions like China and India is not driving down "price per handset." It may be that the emergence of more expensive "smartphones" is helping keep average prices high.

As 3G networks continue to be built out, consumers may find it necessary to upgrade their handsets to take advantage of higher connection speeds.

It is an early indication, but the cellphone industry may be bucking the trend of an economic slowdown.

Douglas A. McIntyre is an editor at 247wallst.com.

Nokia (NYSE: NOK) has come out with its handset sales forecast for 2008. Since it has almost 40% of the global market, its prediction is closely watched. For 2008, it believes that total sales of cell phones will only rise 10%. According to Bloomberg "Nokia said there will be an estimated 4 billion handset users by 2009."

Ten percent growth would be slower than the handset market was in 2007, and while Nokia may prosper because its piece of the business is so big, the news could be very bad for Motorola (NYSE: MOT). With Samsung and Sony-Ericsson getting larger and larger slices of worldwide sales, Motorola either has to claw some of that back, or count on a rapidly rising market to help the entire industry. It now appears that industry growth will not be the answer for the US company.

The other piece of bad news from Nokia is that revenue-per-handset will keep falling as more and more phones are sold in emerging markets. That means that margins will be pressured, another negative for Mototola.

If the Nokia forecasts are right, a turnaround at Motorola just got much harder.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) highlighted the possibility of a merger between XM Satellite Radio (NASDAQ: XMSR) and Sirius Satellite Radio (NASDAQ: SIRI).
• XM Satellite Radio has softened its stance about a possible deal with Sirius Satellite Radio, but any deal between the companies would face obstacles from the FCC.
• Starbucks Corp (NASDAQ: SBUX) rival Dunkin' Donuts plans to open its first store in Taiwan today as part of a regional push into mainland China. Starbucks also has expansion plans for China.
• Commerce Bancorp (NYSE: CBH) is under federal investigation by the Office of the Comptroller of the Currency, in conjunction with the Federal Reserve, due to the company's transactions with bank insiders.
  
• The Financial Times (subscription required) wrote that handset maker Sony Ericsson (NYSE: SNE, NASDAQ: ERIC) moved closed to pushing aside Samsung for third place in market share behind Nokia Corp (NYSE: NOK) and Motorola, Inc (NYSE: MOT); last year it overtook LG Electronics.
  

OTHER PAPERS:

• The New York Times reported that the Chief Independent Investigator has found that a top Interior Department official was told nearly three years ago of a "legal blunder" that allowed drilling companies to avoid billions of dollars in payments for oil and gas pumped from publicly owned waters.
• The Toronto Sun reported rumors that Apple Inc (NASDAQ: AAPL) is working to get the Beatles catalog onto its iTunes service.
  
• Investor's Business Daily mentioned Varian Semiconductor (NASDAQ: VSEA) positively in the "New America" column.