Motorola Expects Strong Sales in 2nd Half
Motorola Inc., the second-largest mobile phone maker, said on Tuesday it expects to sustain strong sales growth in the second half of 2004 on new handsets, sparking its stock to rise as much as 7 percent.
Last month, the Schaumburg, Illinois, company surprised Wall Street by stealing market share away from larger rival Nokia. But analysts cautioned that holiday sales in the fourth quarter will bring stiff competition.
"We obviously had a very good first and second quarter where we blew past anybody's estimates of what we would do," said Geoffrey Frost, senior vice president for Motorola's mobile phone division.
"We feel very good about the second half of this year, given the product portfolio, and as we accelerate our product development time, we expect momentum to continue," he said in an interview in Singapore.
Its shares rose 4 percent in late-morning trading on the New York Stock Exchange, where it was the third most active stock.
Demand in the global cell phone market has risen due to the popularity of newer features like color screens and integrated digital cameras.
Motorola plans to launch about 20 new models in the final six months of the year. They include a 13.9 mm-slim (0.5 inches) flip phone with a nickel-plated keypad and aluminum casing, and a video and music-playing handset with stereo sound.
"Motorola does have an impressive lineup of new products and innovations, but they are not operating in a vacuum," said Jane Zweig, chief executive of the Shosteck Group, a Maryland-based telecommunications consulting firm.
"Motorola is certainly in a strong position but again there are other vendors there, all fighting for the same market," she added, noting that rivals such as Nokia and Samsung Electronics were also gearing up for the critical second half.
Gartner Group analyst Nick Ingelbrecht said Motorola's new phones looked promising.
"They've done well, but have some more work to do. They're not entirely out of the woods yet," he said. Motorola must ensure that delays in launching new models, which plagued the company last Christmas, did not recur, he said.
Wall Street will be watching for signs that Motorola's supply problems are clearly behind it.
"The first quarter they were able to resolve some of those issues," said A.G. Edwards & Sons Inc. analyst Greg Teets, who rated Motorola shares as "buy." "They don't seem to have supply issues in the second quarter. That's what we'll watch and see."
Motorola raised its global market share to 15.4 percent in the second quarter from 13.9 percent a year earlier, according to research group Strategy Analytics.
Market leader Nokia was stung for the second consecutive quarter, with its share falling to 28.9 percent from 36 percent, as it struggled to revitalize its ailing phone portfolio.
Nokia has tried to halt its share erosion by cutting prices on selected models by up to 10 percent, triggering investor concern, analysts said.
Frost dismissed suggestions that Motorola had suffered a big blow from Nokia's strategy, but admitted the discounts had created "a lot of pricing pressure" on its low-end phones.
When asked if Motorola expected to keep average selling prices (ASPs) stable in the coming quarters, Frost was upbeat.
"We've not had a great lineup of high-end phones and the fact we were able to maintain ASPs in the second quarter with our portfolio would lead me to be pretty optimistic about the second half," he said.
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