Motorola's 1Q Results Seen Propelled By Razr Phones

NEW YORK -(Dow Jones)- Motorola Inc. (MOT) could exceed its earnings forecast for the first quarter on the continued strength of its popular, ultra-slim Razr cellphones and building momentum in its newer Slvr model.

Motorola is slated to report earnings after the bell Tuesday. Wall Street analysts project, on average, earnings of 29 cents a share, according to Thomson First Call.

Last quarter, the Schaumburg, Ill., telecommunications equipment maker disappointed some on Wall Street with a conservative estimate for earnings in the quarter ended in March. Its earnings projection was in line with analysts' average estimate, but some bullish investors were looking for more.

As mobile phones continue to sell at a brisk pace, analysts again believe the mobile devices division of Motorola will carry results past company and Wall Street expectations. The business, which made up 62.3% of Motorola's total revenue in the fourth quarter, continues to see strength as it releases new colors and technology standards for its Razr phone while ramping up its Slvr phone and lower end models.

Demand For Razr Using CDMA

While some believed that Razr sales had peaked, it appears as if the new Razr using code division multiple access, or CDMA, technology is picking up the slack from the original version, Citigroup analyst Daryl Armstrong said in a note.

The CDMA Razr is primarily used by carriers using Verizon Wireless or Sprint Nextel Corp. services, while the original was compatible with the likes of Cingular Wireless and T-Mobile USA. As a result of the strength from the CDMA side, he projects a peak in Razr sales during the third quarter.

The analyst doesn't own a stake in the company, but his firm owns 2% or more in Motorola's stock.

Motorola did experience a glitch with the ever-trendy Razr phones in March, when Cingular Wireless and T-Mobile USA pulled the phones from their shelves, after Motorola found a problem with the devices. They were back in stores within a week, and few analysts see a meaningful impact on results.

While the mobile devices business continues to shine, there is more concern over Motorola's other divisions.

Motorola's networks, connected home solutions, and government and enterprise mobility divisions are expected to report year-over-year declines in sales, according to a report by Thomas Weisel Partners analyst Hassan Imam. The analyst doesn't own a stake in Motorola, but his firm is seeking an investment banking relationship with the company.

Earlier this month, Motorola did sell its automotive electronics business to German auto supplier Continental AG (CON.XE) for roughly $1 billion in cash. The business had been a drag on Motorola for some time due to the weak U.S. auto market.

Emerging Markets In Focus

Investors will also focus on the emerging markets, which is becoming an increasingly important battleground between the handset makers. Nokia Corp., the world's largest handset maker, holds the top position in the emerging markets, but Motorola has made large strides since entering the field.

"We believe that Motorola gained share in Europe, India and China," said Oppenheimer & Co. analyst Lawrence Harris in a note. The analyst doesn't have any conflicts of interest to report.

With a higher volume of cheaper phones sold, how well the average selling price holds will be another point of focus for the analysts.

More recently, Motorola has been the subject of consolidation speculation sparked by the combination between Lucent Technologies and Alcatel.

Motorola was among the names that popped up as an acquirer for Juniper Networks. On Saturday, a German paper reported that the company was in talks to buy Siemens's main communications unit. Motorola declined to comment on any M&A speculation.

Shares of Motorola slipped 35 cents, or 1.5%, to $23.67 in early afternoon trading Monday on the New York Stock Exchange. There was volume of about 7.3 million shares. Average daily volume is roughly 19 million shares.

-By Roger Cheng; Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 17th April 2006