5% Downside to Motorola’s Stock if Cisco and Apple Gain in Digital TV Box Market

Motorola (NYSE:MOT), which competes with Cisco (NASDAQ:CSCO) and Apple (NASDAQ:AAPL) in the digital TV box (set-top box) business, has seen its market share decline from 14% in 2008 to 11% in 2009 due to increased competition.

We believe that Motorola will continue to lose share in the digital TV box market and reach 10% by the end of Trefis forecast period.

However, there could be a downside of 5% to the $7 Trefis price estimate for Motorola’s stock if the company’s share in digital TV box market were to decline faster than we forecast and reach 5% by the end of Trefis forecast period.

Digital TV Boxes 13% of Motorola’s Stock

We estimate that the digital box business constitutes 13% of the $7 Trefis price estimate for Motorola’s stock.  Most digital TV boxes are set-top boxes used by the cable/satellite providers like Comcast, Time Warner Cable, Dish TV to provide video content to their subscribers.

Cisco and Apple a Growing Threat

Motorola will continue to lose share in the digital TV box market due to:

1.  Increasing Cisco market share in digital box business

Cisco entered the digital box business when it acquired Scientific-Atlanta for $6.9 billion in 2006.  Cisco’s efficient distribution network spread across the globe helped it gain market share over Motorola.  Motorola digital box business, on the other hand, has a limited international presence and focuses mainly on the US market.

2.  Apple TV a threat to cable and satellite digital TV boxes

We estimate that Apple sold more than 5 million Apple TV units in 2009.  This is equivalent to around 5% share in the digital TV box market.  Although Apple TV doesn’t enable digital cable or satellite feeds, the content that can be accessed through Apple TV is increasingly an alternative to cable and satellite services.

If Apple TV sales continue to grow, it could result in a decline of cable and satellite subscriptions which will have a negative impact on digital TV box manufacturers like Motorola and Cisco.

5% Downside to Motorola’s Stock if it’s Share in Digital Box Market Declines at a Faster Rate

Although we forecast that the Motorola’s share in Digital TV Box market will decline to around 10%, there could be a downside of about 40 cents (5%) to the $7 Trefis Price estimate for Motorola’s stock if the company’s market share declined to 5% by the end of Trefis forecast period instead.

You can modify our forecast for Motorola market share above to see the impact of lower market share on Motorola’s stock.

For additional analysis and forecasts, here is our complete model for Motorola’s stock.