Some Wall Streeters are starting to wonder whether Motorola (MOT) has the stamina to maintain its startling recovery.
Indeed, there is a growing suspicion in some corners that mighty rival
won't play laggard for long. Analysts expect the Helsinki-based tech giant to rally from last quarter's
crushing defeat and surge back stronger than ever, winning back points from Motorola in the process.
Citing a resurgent Nokia, among a list of concerns, Morgan Stanley analysts downgraded Motorola to neutral from buy Friday. Motorola shares, which have more than doubled in the past year, were down 38 cents, or 2%, to $17.71 in midday trading.
The analysts say Nokia's ruthlessness on price-cutting in the cellphone market likely will reverse some of Motorola's recent handset gains and drag down the company's margins.
"The company appears willing to sacrifice operating margins in order to recapture share, and Nokia, as the low cost producer in the handset market, appears to be best positioned to tolerate a price war," Morgan Stanley analyst Angela Dean wrote in the report.
The analysts also echoed growing concerns among investors that Motorola will continue to sit out the so-called third generation, or 3G, wireless network upgrade cycle. Rivals like
have been sweeping up contract wins.
After dumping former CEO Chris Galvin and replacing him with former
executive Ed Zander, Motorola's long
series of stumbles seemed to be over.
For example, earlier this year, once Motorola stabilized its supply of color camera phones, sales soared -- in part due to Nokia's
famous misjudgment of the flip phone fashion. In fact, Motorola saw a sales boom across all business lines last quarter. But as some analysts and investors pointed out, the sales surge couldn't hide the fact Motorola still has some high costs that Zander will have to address.
And now that clamshell designs promise to be a big part of Nokia's crop of 35 handsets coming out this year, Motorola may not be able to repeat last quarter's success.
Also looming on the Schaumburg, Ill., company's horizon is a deal with prime customer
. The Reston, Va., wireless service provider is expected to end its exclusive supply arrangement with Motorola later this year. Nextel will then be free to pick handsets from some of Motorola's fiercest competitors, including Nokia and South Korea's