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Motorola Essay

832 words - 3 pages

Motorola (MOT: 22.50, -0.45, -2.0%) can relate to the sour market reception. The numbers it released last Thursday showed an 18% jump in fourth-quarter sales, a 68% surge in earnings per share (13 cents of which came from a Turkish telecom company's debt repayment), a 40% increase in mobile handset shipments and -- kiss of death -- in-line Q1 guidance. Investors' response: a harsh 8% selloff on Friday.As for the one "surprise" in Nokia's report, here it is: Average selling prices, or ASPs in industry parlance, declined slightly.That's right. Now, I know Motorola said as much in its report last week, but seems this price decline actually is an industrywide phenomenon. Turns out, maturing sales to developed markets and burgeoning sales to emerging markets don't translate into stronger-than-expected ASPs. Go figure.If you ask me, investors and analysts have gotten a bit spoiled by recent sales of next-generation handsets that carry fat price tags. Thing is, those spurts of innovation and subsequent sales cycles come in waves -- they have for years. The overall industry trend remains tilted toward declining ASPs. This should come as a surprise to no one.But what's being overlooked here is the very real impact that emerging-market sales are having on the mobile phone industry. I've written before about how certain segments of technology, such as PCs and cellphones, are getting their second wind as developing economies strengthen. It's something that Kevin Landis, portfolio manager of Firsthand Technology Value fund (TVFQX: 35.81, -0.03, -0.1%) and Firsthand Technology Leaders fund (TLFQX: 20.48, +0.13, +0.6%), among others, discussed with me last month, and it's worth paying attention to.Nokia is a perfect example of this. Consider that the company saw a 23% increase in unit handset sales to Europe -- it's largest market by far -- but a 64% surge to China. Sure, Nokia's sales in China are less than a third of those in Europe, but in the year-ago quarter, they were less than a fourth. And in terms of total sales, China represented more than 11% of total sales in Q4, compared with less than 9% in the year-ago quarter. Bottom line: You can't argue with the trend and the potential in China.What's interesting about these emerging markets is that consumers are mirroring the behavior we've come to expect from folks in more mature markets like the U.S. and Europe. In India, where Nokia has 70% market share, more than 90% of consumers who get a new phone are replacing it with...

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