RealTime IT News

Will Wireless Roll On?

First-quarter results from Motorola and Texas Instruments showed wireless as a telecom bright spot but there are questions whether the momentum will carry through the year.

For the first three months of the year, handset maker Motorola posted earnings per share of 1 cent on revenues of $6 million, slightly better than expected.

At the same time, the Chicago-area company lowered second-quarter guidance, prompting industry watchers to question whether executives could deliver its long term numbers.

"With current company projections of only 3 cents per share in earnings for the first half of the year, we believe the company will be severely challenged to reach its FY 03 earning per share goal of 35 cents to 40 cents per share," analysts at Deutsche Bank (DB) Securities wrote in a note to investors.

Among the "worrisome trends" spotted by DB, was the loss of market share in China. During the last nine months, several startups have opened manufacuring factories there, increasing supply and squeezing Motrola and other phone makers who count on strong sales in the populous country.

Motorola's planned purchase of Winphoria Networks, which specialzes in "push-to-talk" technology for phones, could boost business from carriers.

In addition to making buys that could boost revenues, Motorola plans to slash $3 billion in costs in 2003 and 2004. Some of the savings will come from the elimination of 3,000 jobs this year, through attrition and layoffs.

Meanwhile, TI also released good first-quarter results, 7 cents per share on revenue of $2.19 billion.

"As has been the case for the past six quarters, wireless continues to be the pincipal growth driver of (TI's) revenues," DB analysts noted.

The Dallas company should continue to benefit from cell phone upgrades to 2.5G . DB said 2.5G phones could account for 80 percent of market volumes by the fourth quarter. The company also reported gains in chips that power DSL and cable modems, consumer products such as DVDs and digital cameras.

DB noted that, like Motorola, TI is watching costs and will eliminate 800 jobs to save $80 million a year, though 2005 will be the first time the savings will be seen. Many of the cuts will come from TI's sensors and controls business in Attleboro, Mass.

The war in Iraq and SARS scare did not appear to impact TI's first quarter, company officials said. DB analysts were encouraged by TI's report and outlook, however, are wary of the sector as a whole.

"While we remain in the skeptics camp (regarding) semiconductor end-demand, we believe that (TI) makes a solid case to back up their (second quarter guidance)," DB wrote.