Skip to main content

Suddenly 2002 Doesn't Look Like the Year for Wireless

Ericsson's call has triggered a gush of negative sentiment.

Let it all out, honey. Have a good cry.



announcement Tuesday that it sees a flat 2002 for its wireless-equipment business unleashed a torrent of negative sentimentthat raged through the market Wednesday. By the end of trading, equipment providers had all been laid low by the Swedishwireless-equipment leader.

We'd only just begun to give up on the second half of 2001, and it might now be time to plan for heartbreakin the first half of 2002 as well.

By Wednesday the market's belly was cramped from sobs over Ericsson's prediction that it would turn in two flat quarters to finish out 2001 andexpects little to no improvement next year in its market-dominating equipment business.

Then news rolled in from Boston, where the Embedded Systems Conference is underway, featuring



chip chief Fred Shlapak. Shlapak reconfirmed that the semiconductor division would post lower sales sequentially in the third quarter after $1.3 billion in second-quarter revenue, already a 38% year-over-year decline.

He cautioned, however, that continued pain in the mobile-phonemarket and in set top boxes through the first quarter of 2002 would hamstring his group's efforts.

Keep in mind that investors lost their shoulder to cry on back in June as stalwart


(NOK) - Get Nokia Corporation Sponsored American Depositary Shares Report

warned it wouldn't make second-quarter metrics. Whenit reported its final results, it kept investors' hopes in check with guidance that it would turn in flat-to-5% sales growth in the third quarterwith a slightly slimmer sequential 12- to 13-cent profit.

Scroll to Continue

TheStreet Recommends

Nokia predictedadjectiveless growth in the fourth quarter, free of numbers to hold it to.In its third-quarter outlook, Ericsson posted stronger-than-expected equipment revenues, but admitted the sales environment was getting moreuncertain and would predict only an uptick in North America for the rest of the year. Motorola, in its damaged, reorganized state, earned back a few points of mobile-phone market share, but could only hope for a 5% total sequential sales increase.

Since then, however, rumblings from the chipmakers and the ensuing holiday season helped investors regain enthusiasm. Ericsson worked its way back to only a 10% drop between July's opener and the end of August.Motorola climbed 4% during the same period. When




RF Microdevices


hinted at improvement in orders from mobile-phone companies, the market mustered a grin. But on Wednesdaycommunications-chip giant

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

preceded an investment bankingpresentation with a

Securities and Exchange Commission

filing stating it would stick to third-quarter guidance that third-quarter revenue will fall 10% to 15%.

Wild Wireless
It's been a downhill slide for wireless' big players since last year's peak

Soon enough all hell broke lose as Merrill Lynch downgraded its numbers for the handset industry from 390 million to 360 million mobile phones to be shipped worldwide in 2001. Merrill also docked its ratings for Motorolabased on the weakness of its end markets. US Bancorp Piper Jaffray dragged Nokia down a notch because it believes Ericsson's specific mention ofEuropean trouble will be bad for Nokia's equipment stronghold in Western Europe as well as Latin America. Additionally, Nokia is expected to giveinto price cuts to maintain its healthy market share, which would hurt its margins.

All this puts investors on edge, waiting for Nokia to lower expectations from modest growth in 2001 over last year's 405 millionhandsets shipped. Nokia stuck with that view during its second-quarter review, but such a return requires the market to charge uphill inthe second half of 2001. That relies on a boffo fourth quarter, something that its competitors put in doubt as they turn negative on the rest of theyear and even early 2002.