Analyst: Samsung positioned to steal Motorola’s No. 2 slot in Q2

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Analyst: Samsung positioned to steal Motorola’s No. 2 slot in Q2


By Phil Carson

Story posted: June 12, 2007 - 1:35 pm EDT
Samsung Electronics Co. Ltd. could overtake Motorola Inc. in market share for the second quarter, according to projections from analyst Ittai Kidron at CIBC.

The share shift would be remarkable, based on 2006 results, which had Motorola at nearly 22% global market share and Samsung at 11.4%, according to year-end data from Strategy Analytics.

Whether such a shift would be fleeting or long-term remains anyone’s guess. Samsung’s margins may dip as it expands into emerging markets, while many expect Motorola to make a strong comeback in margins and share over the next 12 months and beyond.

But Kidron cited Motorola’s current retrenchment in emerging markets and new, higher-margin handsets launching in late 2007 and 2008 as reasons for its stall and projected loss of market share. The analyst forecasted a nearly 12% sequential decline in handset shipments between first and second quarters of this year, estimating that Motorola will ship 40 million phones in the second quarter, less than any quarter in well over a year.

Even that tempered estimate may be high, the analyst wrote in a note to investors. North and Latin American markets remain strong for the American handset vendor, but Europe and Southeast Asian markets are weakening.

In contrast, Samsung is looking at a 9% sequential increase in handset shipments in the second quarter, to nearly 38 million units, a projection that may be conservative, Kidron said. Much of Samsung’s growth will come in low-tier, GSM-based replacement markets in Asia, the analyst forecasted.

A surge in Samsung’s low-tier replacement sales—handsets below $100 will grow in its mix, the analyst projected—and potential difficulty in meeting its own projections for W-CDMA sales, particularly in Europe, may cause Samsung’s margins to suffer in the second quarter, but rebound in the second half of the year.

“Operationally, the company’s strategy, portfolio and culture are evolving under new management,” Kidron wrote of Samsung.

Besides a newly reheated rivalry between the second- and third-place global handset vendors, Nokia Corp. stands to gain the most from these market share shifts, according to Kidron. Nokia may well surpass 37% global share for the quarter. Sony Ericsson Mobile Communications L.P., in fourth-place, could grow to 9%, and LG Electronics Co. Ltd. could reach 7.4%—incremental gains for both, possibly courtesy of Motorola’s retrenchment.

Motorola’s stock was down slightly on the news to around $18 per share.