In a note to clients, Lehman Brothers analysts Tim Luke, Jeff Kvaal and Jiong Shao noted the positive tone that came out of the CTIA wireless industry trade show this week:
* In handsets, we believe demand trends globally remain robust led by emerging markets but accompanied by encouraging WCDMA and DO trends where estimates may remain conservative. Inventories appear healthy. Overall we believe market leaders Nokia (NYSE:NOK) and Motorola Inc. (MOT) are continuing to extend their market share leadership.
* With respect to Motorola (MOT) our checks suggest strong recent trends and for 1Q06 we consider our higher end estimate of 46 million units may potentially be achievable versus consensus of just 42 million units. For 2Q06 we expect normal seasonality of flattish to up slightly. While margin levels are challenging to forcast we believe our high end EPS estimates of $0.30 in March and $0.30 in June may prove achievable if not conservative. We reiterate our 10W rating.
* In the infrastructure market, vendors appear to be seeing growth in the mid to upper single digits in CY06 with a focus on IMS development as well as HSDPA upgrades and EVDO Rev A rollouts. We remain encouraged by Ericsson's (ERICY)(10W) positioning in HSDPA and in services with an increasing focus on IMS.
* Our checks suggest Cingular's spending plans remain unchanged for 2006 and that Powerwave Technologies Inc. (NASDAQ:PWAV) retains its market share, suggesting PWAV's sales will recover steadily through 2006.
* In the applications arena, mobile TV appears to be seeing significant interest with gaming and music also seeing growing traction. Mobile Email is also a key area of focus (Mot's Q phone, Nokia E series) Comverse (NASDAQ:CMVT)(1OW) appears to be seeing strong demand trends in messaging and billing.
* In the semi arena, we continue to believe estimates for Qualcomm (NASDAQ:QCOM) (1OW) remain conservative and we believe GSM leader Texas Instruments (NASDAQ:TXN) (2EW) is also likely seeing healthy 1H06 trends.