Nokia (NYSE:NOK) recently purchased most of Motorola’s (NYSE:MOT) wireless network infrastructure division for $1.2 billion in cash. This transaction is expected to close by the end of 2010.
The deal should help Nokia gain business from existing Motorola customers like Sprint Nextel (NYSE:S) in the U.S. and KDDI in Japan.It also raises Nokia’s profile in the gigantic U.S. telecom market, which could help it sell more mobile phones to U.S. customers. Our analysis follows below.
The slow economic recovery has not been kind to telecom hardware manufacturer Cisco (NASDAQ:CSCO). Cisco, which competes mainly with Juniper (NYSE:JNPR) in the Internet router and switch markets, recently reported earnings for the fourth quarter of its fiscal year.
Because Cisco’s quarter ends one month later than most tech companies, its performance is a good indicator of current economic conditions. Cisco’s results did not meet analyst expectations, apparently because of soft demand for its relatively high-priced products. The earnings release also coincided with a poor U.S. employment report. Following these two announcements, the company’s shares fell by 10%.
Based in part on the earnings report, we have reduced our stock price estimate for Cisco from $26 to $24.76. This relatively modest price reduction reflects our belief that the market is exaggerating the extent of Cisco’s woes. Reasons for optimism include Cisco’s rapid growth in emerging markets and the strong performance of products such as the Nexus family of switches. Our analysis follows below. Read More »
Cisco (NASDAQ:CSCO) competes with Juniper (NYSE:JNPR) and Alcatel-Lucent (NYSE:ALU) in the router market. We currently have a Trefis price estimate of $25.58 for Cisco’s stock, 5% above the current market price of around $24.
Trefis members have created forecasts for two key drivers of Cisco’s share value over the last week: (1) Enterprise Router Market Size and (2) Routers Gross Profit Margin. Their forecasts suggest that Cisco’s enterprise router market size will trend above the Trefis forecast, while the company’s router profit margins will trend roughly in line with our forecast. These projections indicate a combined upside of around 1% for Cisco’s stock.
We estimate that routers constitute about 16% of the $26 Trefis price estimate for Cisco’ stock. Hence the stock is not significantly impacted by (1) Enterprise Router Market Size and (2) Routers Gross Profit Margin. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.
Research in Motion (NASDAQ:RIMM), which operates the popular Blackberry Messenger service, has been facing mounting pressure to open its secured data network for scrutiny by the governments of Saudi Arabia and the United Arab Emirates. Until last week the company had refused, maintaining that its business depended on maintaining the confidentiality of its data.
According to recent news reports, Saudi officials are now in talks with RIM to place BlackBerry servers inside Saudi Arabia that the government could monitor. RIM competes with Apple (NASDAQ:AAPL), Motorola (NYSE:MOT) and Nokia (NYSE:NOK) in the mobile phone market. Several other countries, including India, Algeria and Lebanon, have recently pushed for access to BlackBerry data for law enforcement purposes.
If RIM denies their requests, its BlackBerry Messenger service and/or smartphones could be banned from these countries. On the other hand, some BlackBerry users might lose confidence in the service if they feel that their data is no longer confidential.
If the issue is not successfully resolved, there could be serious implications for RIM’s stock price. Our analysis follows below. Read More »
Juniper (NYSE:JNPR) competes with Cisco (NASDAQ:CSCO) and Alcatel-Lucent (NYSE:ALU) in the networking equipment market. We currently have a Trefis price estimate of around $25 for Juniper’s stock, about 10% below the current market price of $28.
Trefis members have created forecasts for two key drivers of Juniper’s stock over the last week: (1) Juniper Market Share in Edge Routers and (2) Routers Gross Profit Margin. The members’ forecasts suggest that Juniper Market Share in Edge Routers and Routers Gross Profit Margin will trend above the Trefis estimate. These projections indicate a combined upside of around 12% for Juniper’s stock.
We estimate that Routers account for around 35% of the $25 Trefis price estimate for Juniper’s stock. Hence the stock is quite sensitive to (1) Juniper Market Share in Edge Routers and (2) Routers Gross Profit Margin. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.
Apple (NASDAQ:AAPL) recently announced results for the second quarter of 2010. Headline news: Despite increasing competition in the smartphone sector, iPhone pricing remained strong at an average of $595 for the quarter. This compares well with the $593 average price for the whole of 2009.
We recently increased our Apple stock price forecast from $296 to $337 due to the iPhone pricing news and several other factors that we will cover in a future article. This forecast incorporates our assumption that competitive pressures will force Apple to lower iPhone prices over time. Our analysis follows below.
Cisco (NASDAQ:CSCO) competes primarily with Juniper (NYSE:JNPR) in the router and network switches business, but is increasingly feeling the heat from Huawei, a fast growing Chinese telecom equipment manufacturer.
Huawei has been expanding rapidly in the international routers market lately, and though not a prime competitor to Cisco, its growing presence does pose a potential threat to Cisco’s long-term dominance in routers.
A recent 2010 ranking for the World’s Most Innovative Companies by FastCompany.com listed Huawei at number 5, ahead of Cisco which was number 17, and indicative of Huawei’s R&D efforts and ambitions in the router business.
Below we explain how Huawei’s revenues and profits have been increasing, why Huawei’s low-priced equipment can be a challenge to Cisco’s market share and margins, and how Cisco’s stock may ultimately be impacted by Huawei.
Motorola (NYSE:MOT), which primarily makes money by selling mobile phones, also leads in the cable broadband modem market where it competes with Cisco (NASDAQ:CSCO), Arris, Ambit and Thomson. Motorola’s cable modem market share, however, has declined steadily from 40% in 2005 to 30% in 2009.
We believe that Motorola cable broadband modem market share will continue to decline due to increasing competitive pressures primarily from Cisco and Arris, reaching about 27% share by the end of Trefis forecast period.
Cisco (NASDAQ:CSCO), which competes with Juniper (NYSE:JNPR) in the networking equipment business, witnessed significant declines in its enterprise router revenues in 2009. We estimate that Cisco’s revenue decline mirrors the 28% decline in the global enterprise router market (as estimated by Infonetics Research).
The decline in the global enterprise router market is attributable to IT budget cuts and delays in infrastructure upgrade projects, resulting from the slowing economy and customers opting for low cost equipment. According to Infonetics Research, however, the enterprise router market is showing signs of rebound from recession.
Below we discuss the significance of enterprise routers for Cisco, why we expect the enterprise router market to rise, and how this impacts Cisco’s stock.
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.