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Wireless stocks climb on talk of a bottom

Stocks in wireless equipment makers get a boost after a few analysts suggest that the sector could be due for a rally.

Wireless stocks got a boost Monday after a few analysts bandied about the idea that the sector could be due for a rally.

The big five wireless equipment makers--Motorola, Lucent Technologies, Nortel Networks, Ericsson and Nokia--have all reported their second-quarter results, and the news has not been good. But analysts are now saying the wireless sector could be on its way up again.

By market close, Openwave was up 64 cents to $25.63, after hitting a high of $28.14 earlier in the day. Qualcomm rose 93 cents to $64.11, Motorola gained 3 cents to $19.03, Nokia climbed 43 cents to $21.63 and Ericsson was up 45 cents to $5.30. CNET?s Wireless index rose more than 4 percent.

?Wireless has been one of tech?s worst-performing sectors,? wrote Merrill Lynch analyst Steven Milunovich in a research note. But the group could be due for modest estimate revisions and normal inventory levels by the end of summer, he said. Merrill Lynch, which still recommends investors have "underweight" holdings in the technology sector, changed its stance on the wireless sector from "underweight" to "equal weight" Monday.

Milunovich said he likes stocks such as Motorola and Openwave. Nokia and Qualcomm also got a thumbs-up; "Qualcomm?s CDMA (code division multiple access) is a terrific wireless technology," Milunovich wrote. He also noted that fellow Merrill Lynch analyst Michael Ching thinks Nokia could reach $73 a share.

But Milunovich said he was "negative" on third-generation technologies and Bluetooth--a technology that allows wireless communications at a short distance.

Morgan Stanley analyst Arindam Basu sounded a similar caution on newer wireless technologies in his Monday research note. "Momentum for next-generation technology builds probably won?t occur until the second quarter or the third quarter of 2002," he wrote.

But the analyst?s research note, entitled ?Pain in the Food Chain,? also said the wireless sector is on its way to recovery. "The body language from the food chain indicates that this may be the bottom," wrote Basu. His only concern is "the timing and length of a recovery."

Raymond James analyst Todd Koffman upgraded Motorola on Friday on signs of improvement in the wireless sector. "Motorola reported encouraging June quarter results," Koffman said. "This was followed by a host of other wireless players who suggested the wireless market is starting to show signs of improvement," he added.

Despite the nascent optimism, analysts were still cautious on companies lower down the wireless food chain. "Risks to the 2001 (and potentially 2002) estimates for suppliers to these original equipment manufacturers remain, even in the face of reset expectations," wrote Basu. He named Anaren Microwave, DMC Stratex Networks, Powerwave Technologies and Proxim as key wireless suppliers.