Thursday, March 16, 2006

Losing Its RAZR's Edge looks at the prospects for Motorola's stock after a great run in 2005 when the stock soared more than 40 percent due in great part to the success of the Razr. It doesn't expect the same for 2006 citing "product cycle, competitive environment and, most importantly, expectations."

John Slack at Morningstar said, "Expectations are high for Motorola now. There weren't any expectations for Motorola a year ago." Plus, the Razr is no longer the "it" phone as it was last year with Casey Ryan at Nollenberger Capital Partners saying "RAZRs are now more of a value phone."

And with competitors entering the ultra-thin phone stakes, Edward Snyder at Charter Equity Research said, "It's certainly going to be the case that the competitive environment gets tougher this year."

The article then notes the slower sales of newer handsets such as the Rokr, Slvr and Pebl, the delay of the Q, and last week's quality problems found in the Razr. However with all these issues, Morningstar's Slack thinks "there's still room for operational efficiencies, particularly from outsourcing and tightening up the supply chain. That would be a great return, of course, but he's not counting on a surge like last year's."

On the other hand, Nollenberger's Ryan doubts "Motorola will be able to increase market share — as it's repeatedly said it wants — and grow margins."