A subdued tone for cell phone makers

A few cell phone companies report signs that business improved last quarter, but don't look for much of a turnaround in the wireless sector.

Ben Charny
Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
2 min read
The communications market is still waiting to see a little daylight.

Although a few companies are reporting signs that business is improving, most makers of cell phones and related equipment are showing little indication of a turnaround. Sales of handsets are growing, but not by much, while handset makers continue to slow down spending on network improvements and expansion.

Still, there are some signs of hope. Carriers, for instance, are turning to network equipment makers for the switches and other gear needed to add Wi-Fi wireless networking to their mix of service offerings. And the public continues to demand more bandwidth as Internet traffic grows.

Both Nokia and Motorola braced the market for bad news about cell phones back in June, when both lowered their forecasts for the quarter. Ericsson is expected to report yet another quarterly loss, dragged down by flagging sales of a handset joint venture with Sony.

The three have cited various reasons for failing to turn around a nearly three-year dip in handset and infrastructure sales. A remaining concern is the SARS epidemic in China, which has slowed one of the few bright spots in the otherwise slumping wireless sector.

"Managements' tone was definitely subdued," during recent conference calls, Deutsche Bank analyst Brian Modoff told clients Monday. "We don't expect them to suddenly reverse their position and become more positive on their second-half outlook for the entire industry."

Motorola, the world's second-largest cell phone provider, will report quarterly earnings on Tuesday. Motorola is expected to report a break-even quarter, with sales of handsets, chips and network infrastructure equipment of between $6 billion and $6.2 billion.

Nokia, the No. 1 seller of handsets , is expected on Thursday to report a profit of 17 cents per share on $8 billion in revenue. That represents a 3 cents per share dip from the previous quarter's numbers.

In June, Nokia blamed SARS and a large inventory of cell phones when it lowered its annual cell phone sales forecast. Instead of being 8 percent ahead of 2002, this year's Nokia handset sales will grow by 4 percent, the handset maker said in June.

Ericsson expects to report a quarterly loss of 19 cents per share, dragged down partly by the falling fortunes of Sony Ericsson. Although Sony Ericsson is expected to have captured more market share this quarter, the joint venture continues to lose hundreds of millions of dollars.

Equipment provider Juniper Networks set the tone for the upcoming reports last week, when, even though reporting what analysts said was a "good" quarter, it said the next few quarters would not see much lift in sales.