Wednesday, August 09, 2006

Signals good for Motorola

The Chicago Tribune reports that Sprint Nextel's (S) plans to spend up to $3 billion on a WiMAX netwrok is good news for Motorola (MOT), since the company "will be a key equipment supplier for the network."

According to the article, Motorola has been making strides to bolster it's 3G and WiMAX knowhow, and "recently invested $300 million in a WiMax start-up called Clearwire, which also got $600 million from Intel (INTC). Motorola will be Clearwire's exclusive equipment supplier."

As to whether WiMax will succeed, Mike Walkley at Piper Jaffray said, "the jury is still out." However, he added that Sprint's WiMax network presents "a nice piece of business." Walkley also noted that "it helps allay worries that in the longer term, Motorola's business with Sprint Nextel would wane."

The article pointed out that "the WiMax deal also comes a week after Sprint announced it would begin selling two high-end Motorola phones--the Q and the Slvr--later this year." Lawrence Harris at Oppenheimer & Co said, "Motorola's relationship with Sprint has been solidified." Harris added that if Motorola performs well on the Sprint deal, "it will be in a lead position to win additional (WiMax) contracts."

Ed Snyder at Charter Equity Research stated he "wasn't too optimistic about Sprint's WiMax network." He wrote in a recent research note that "It's "more marketing hype than market reality."

Snyder believed "the market for wireless data services--which advanced networks like WiMax serve--has been disappointing so far in the United States." He commented that "Motorola will get some modest benefits from the Sprint deal. But there's no indication WiMax will fare better than fast cellular systems that are currently in use."