This column was originally published on RealMoney on July 18 at 2:00 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.On Wednesday and Thursday, the big questions about the phone market in the second quarter of 2006 will be answered. As Motorola ( MOT), Texas Instruments ( TXN), Nokia ( NOK) and LG report within 24 hours of each other, I would argue that investor focus is going to be almost exclusively on their phone sales volumes. There are periods during which markets fixate on average sales-price numbers, but this is not one of them. The biggest fears now center on handset-volume growth, and this likely will drive the market reaction to Motorola and Nokia and, by extension, component supplier Texas Instruments. All three are well positioned to deliver volume upside surprises. Some are worried about inventory buildup and third-quarter prospects, but in my view it isn't likely these companies will offer detailed commentary on their third-quarter outlooks. They all have edged away from being too proactive on guidance, and this is likely to continue unless there is rapid deterioration in the marketplace right now, which I don't believe.
Waiting for the Next SlowdownWhen Sony Ericsson raised its 2006 global handset unit estimate to 900 million, the markets didn't bat an eyelid. Estimates by independent research firms had already raced to 950 million and beyond by last spring. Given that global handset sales hit 517 million units in 2003, we are looking at a near doubling of annual sales in only three years.
Volume CodeBen Wood from Collins Consulting crystallizes the rumblings that are emerging from several independent research outfits: "We're expecting Nokia and Motorola to have a strong Q2 as the relentless demand for mobile phones continues. Q3 might be a different story, as we have heard that there has been some inventory building in certain European channels toward the end of Q2."
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