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RF Micro Devices
can easily be attributed to
( MOT), its second-biggest customer.
After all, Motorola's
first-quarter warning was so massive, one has to assume that the company is pulling back pretty aggressively from component orders.
RF Micro Devices is clearly a prime candidate for collateral damage, as Motorola makes up roughly 30% of its sales.
However, RF Micro's latest news also keeps alive questions about the overall health of the handset market.
The potential wrinkle in its warning is that RF Micro's biggest customer is
, with perhaps 35% of its sales. If Motorola's market-share losses have translated directly into a windfall for Nokia, you'd expect a ramp-up in Nokia's component orders, which would offset most of Motorola's cancellations.
In theory, chip companies get better prices with "top-up orders," which happen when phone vendors respond to a sudden increase in demand by placing orders on a relatively short notice.
Other RF Micro clients include
; these brands are right now on a market-share rampage in the European upgrade sector. The currentKorean midpriced phone renaissance is built on new pencil-thin GSM slider phones that have recently received a rapturous response in European and some notable Asian markets. This should be manna from heaven for RFMD: relatively pricey new GSM-EDGE phones with suddenly spiking volumes.
So why would Motorola's soft spot derail RF Micro's spring quarter if Nokia, Samsung and LG are picking up all the slack? That's the question that is driving RF Micro's stock price down almost 10% today. Markets did realize that Motorola's warning would have some impact on RF Micro, but they didn't anticipate that the impact would be this substantial.
The question of whether Motorola's mega-warning implies more than purely company-specific issues was also kept alive in
warning, issued earlier this week. We can't yet characterize it as a phone-industry warning cluster, but we're probably about one more revenue scare away.
Any discordant macroeconomic and/or geopolitical notes over the next week or two likely will resonate with this knot of uncertainty at the heart of the mobile telecom sector.
At time of publication, Kuittinen had no positions in the stocks mentioned, although holdings can change at any time.
Tero Kuittinen is a senior product specialist for Nordic Partners, Inc., a pan-Nordic brokerage firm. Although Kuittinen is an employee of Nordic Partners, Inc., the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Nordic Partners, Inc., nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback;
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