Motorola’s (NASDAQ:MOT) wireless networks business makes money by providing network equipment for mobile phone technologies such as GSM, CDMA, iDEN and LTE to telecom companies like AT&T, Sprint, Verizon and Vodafone. Motorola’s wireless equipment sales have recently declined; however, we believe that further declines can be slowed as a result of higher demand for next generation WiMax technologies. We believe that there could be additional upside to the Trefis estimate for Motorola’s stock if wireless network sales were to improve due to WiMax.
Declining Sales of 2G and 3G Wireless Equipment
In the last quarter of 2009, Motorola reported a decline in its wireless revenues to $4.1 billion, far lower than our estimate of $4.4 billion. The company is continuing to see declines in its wireless networks revenues due to lower sales of 2G and 3G mobile network equipment, as well as fading demand for its push-to-talk iDEN technology (used by Sprint).
Sales of the company’s WiMax wireless network equipment have been limited to date but we believe that WiMax will be a crucial factor for Motorola’s wireless network business going forward.
WiMax for Next Generation Networks
WiMax technology is designed to enable high-speed mobile internet access for mobile phones, notebook PCs and consumer electronics such as gaming devices, cameras, camcorders and music players. As the fourth generation (4G) of wireless technology, WiMax is designed to provide low-cost, all IP-based mobile access for data (internet, SMS), video, and voice.
Motorola’s Wireless Revenues to Decline to $2.9 Billion
We currently forecast that Motorola’s wireless revenues will continue to decline from $4.1 billion in 2009 to $2.9 billion by the end of Trefis forecast period due to continued declines in demand for iDEN, 2G and 3G technologies.
We expect telecom companies like AT&T, Verizon and Sprint to invest in 4G network upgrades over the coming years and expect Motorola’s WiMax sales will benefit as a result. However, we currently forecast that these WiMax sales will not be able to offset all of the sales declines in Motorola’s existing network technologies.
We estimate that Motorola’s wireless networks business constitutes 8% of the $7.19 Trefis price estimate for Motorola’s stock. You can modify our forecast above to see how Motorola’s stock would be impacted if its wireless revenues declined less than we forecast as a result of WiMax.
For additional forecasts and analysis, here is our complete model for Motorola’s stock.
