Updated from 10:25 a.m. EDT

Morgan Stanley downgraded

Motorola's

(MOT)

shares Wednesday, saying the stock has exceeded the brokerage firm's price target.

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Analyst Arindam Basu believes that at $10.73, and above his $10 price target, Motorola's shares are fairly valued. As such, the analyst cut the company's investment rating to equal-weight from overweight and said the downside risk is that the stock could fall as low as $6.

Basu said Motorola's second quarter was weak because of excess channel inventory after the SARS outbreak. He also believes that new product introductions have led to an oversupply, which will only add to the existing excess inventory problem.

The analyst didn't change his estimates and said Motorola has "significant operating leverage." Cost controls will help the company improve its business when the economy recovers, Basu said.

Overall, Basu is cautious on the wireless industry. "Reduced carrier capex, 3G delays and competitive pressures all shape our outlook," Basu said. "We see no material improvement before 2004."

Shares of Motorola closed unchanged Wednesday, at $10.73.