Demand For Motorola RAZR Getting Duller

Pacific Crest’s James Faucette asserts that demand is slipping for the vaunted Motorola (MOT) RAZR cell phone. “Our most recent checks indicate that the RAZR’s reign as the top-selling phone in the United States may have begun to fade quite considerably in the past few weeks of the holiday selling season,” he wrote in a research note today. And he adds that “in Western Europe, the RAZR also seemed to fade late in December, particularly for post-paid contracts.”

Faucette reports that the RAZR is showing “the greatest incremental weakness that we have seen in our checks since the product was introduced more than two years ago.” He warns that “Motorola may have more excess channel inventory to work down in [the first quarter] than it has had in previous years.”

Meanwhile, he notes that the KRZR “continues to languish” in the U.S., while doing better in Europe thanks to “more aggressive subsidies.”

Faucette trimmed his 2007 revenue forecast for the company to $46.58 billion from $46.78 billion; he trimmed his EPS estimate to $1.47 from $1.58. “The primary drivers of our reduced estimates are a lower handset ASP assumption and lower expectations for margin improvement,” he wrote.

And he warns that further estimate cuts could be required. “Given what we believe is a slowing handset market in developed markets in general and a slowdown in the RAZR in particular, we believe there is risk of further downside to our new 2007 estimates.”

Motorola today is up 24 cents at $20.80.

Comments

[Tom B:]

Anticipation of a potential Apple phone. Why settle for "reasonably inoffensive" when "really cool" might be just around the corner? I know I've held on to my ancient MOT V60 way long in the hopes the cell industry might grow out of its infancy.

2007 Jan 03 04:56 PM

[Jason Hill:]

I don't believe in cell phones, but I believe in Motorola. I think it is an amazing buy right now. I am too scared to put money in it right now, but if I had the chips, I would be "all in"

2007 Jan 03 08:37 PM

[David S1:]

Ok, Jason, this is just an entirely unsolicited thought, but... If you totally believe that a stock is an amazing buy (and read semi-esoteric financial blogs), then you should really find some way to invest in it, otherwise you'll just end up with a bunch of regrets, because when you don't trade all you ever remember is the winners you would of had. As you probably know, there are a great many ways to profit from moves in a company while mitigating the risk inherent in owning the stock. You could, for example, buy a call @ 20 and sell one @ 25. Or you could buy the stock and sell a call. Or you could buy the stock and buy a put. I don't have an opinion on MOT (do have some fond memories of nice trades on the stock though), so I'm not trying to suggest I agree with your stock call. I'm just saying, sooner or later you've got to go with your gut to figure out whether it's worth a damn. One last thing, perhaps you're scared because what you're thinking about doing is going 'all-in' ? That is pretty much never a good idea when it comes to investing / trading, and we all know that we can much more effectively manage and perceive our risk when it is kept to tolerable levels. Just some thoughts. Oh yeah, and did we REALLY need this nice little analysis to tell us the RAZR was over?

2007 Jan 04 02:09 AM

[Jason Hill:]

You are so right. I do agree with you that going all in is silly and irresponsible. All I have read about investing is that investing in individual stocks should be reserved until your RRSPs are maxed in somewhat safer mutual funds, and you should not commit more than 1% to 15% of your portfolio in stocks. Even at that, you should spread them around. Well, in order to do that, you need a couple hundred thousand. I am not there. One day. Thanks for your advice. I will continue to watch with interest and learn for the time I can put a proportionate % of my portfolio in stocks.

2007 Jan 04 03:04 PM

[Tom B:]

I don't think MOT is well managed or has any very compelling products. IMHO (which may be wrong), I would not call MOT a "buy".

2007 Jan 04 08:52 AM