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CIBC upgrades their rating on Motorola (MOT) to Sector Outperformer from Sector Performer and sets a $23 target. Firm notes they see several positive under-the-surface trends that make them optimistic on MOT's future potential. Near term, they expect a very weak 2Q07 and have cut their estimates but see a unit/margin improvement starting 2H07.

MOT's focus on margins and not share should lead to a higher LT margin model. Thus, the firm views NT (low-margin) share losses in a positive context. Asia checks suggest the RAZR2 is ramping modestly, yet with a lower unit base; the RAZR2 doesn't need to be a home run to make an impact.

CIBC believes investors should focus on product portfolio and margin progress, yet not look for a game-changing model. MOT needs to avoid the pitfalls of the RAZR. A broad portfolio with good number of decent selling models is the target. So, don't look for a game changer, it's a different game.

- Piper Jaffray notes their May channel checks indicate Motorola North American market share declined, and they believe its global share also continues to struggle. The firm is lowering their 2007 handset market share estimates for Motorola from 17.7% to 17.2% and 2008 market share estimates from 18.3% to 17.1%, resulting in lower EPS estimates. 2007 EPS estimate goes from $0.47 to $0.36 and 2008 EPS estimate from $1.10 to $0.99.

While checks indicated solid share at T-Mobile due to the RIZR and a price cut in the KRZR, PJ believes Motorola products lost share vs. the competition at the three other major carriers.

Based on firm's belief it could take several quarters for Motorola's mobile phone operating margins to recover, they maintain Market Perform rating and $18 target.

- Goldman Sachs is also out on MOT saying their channel checks suggest risk to Motorola's 2Q2007 handset unit shipments (relative to Street Consensus). Consequently, they are lowering their 2Q unit shipments estimate to 41 mn from 44.5 mn, which the firm believes could still be at risk depending upon the amount of channel inventory that needs to be worked through. Additionally, they anticipate further restructuring related to the non-handset business segments, which they believe suggests risk beyond Mobile Devices. Maintains Neutral and $16 tgt.

Notablecalls: It's hardly a surprise that MOT is looking at couple of pretty tough quarters here. Especially with Apple (AAPL) coming with their iPhone in four weeks. Still, CIBC makes a valid point regarding market share vs. profitability. I continue to stand by my positive stance on MOT.

MOT 1-yr chart

MOT

Source: Still Bullish on Motorola: Near Term Weakness, Long Term Strength