Analysts See a Slow Wireless Recovery

Analysts are cautiously optimistic that the global wireless market is slowly recovering from the lows of 2001. The mild recovery is being driven by a marginally healthier U.S market and the stability of Asia. The European market, however, remains in the doldrums.

The split between the U.S. and Europe was vividly illustrated this week as U.S. players like Motorola Inc. and Sprint Corp. perked up stock markets with better than expected quarterly numbers. The world’s number one handset manufacturer, Finnish giant Nokia Corp., shattered that confidence on Thursday when it said it would not sell as many mobile phones this year as it had previously predicted.

Yet, despite Nokia’s bombshell, many analysts do see the wireless market emerging from the gloom this year.

“I do think the worst is behind us in the recent wireless industry market correction,” says John Bucher, research analyst at Gerard Klauer Mattison & Co. Inc., although he adds that many handset and wireless infrastructure equipment providers are still feeling the pinch as operators move from spending to capture market share to managing their cash flow.

Figures from RBC Capital Markets show a mixed picture for the global market as a whole. The firm predicts that worldwide handset sales will be up around 10 percent on last year, with 410 million to 430 million units expected to be sold in 2002. These figures tally with the revised estimates that Nokia laid out on Thursday.

RBC’s wireless analyst Mike Walkely says he was surprised by Nokia’s announcement, because wireless chip suppliers such as RF Micro Devices Inc. and Intel Corp. had reported that shipments were up.

Nokia’s original estimate that it would beat its 2001 figures by 15 percent had been seen by many as overly optimistic. Walkely figures the new estimates are certainly achievable and that Nokia may even beat its predictions later in the year.

On the infrastructure side of the market, RBC believes things still look unhealthy. The firm predicts that global spending on wireless infrastructure will be down 5 percent to 10 percent this year.

Europe is the region that could drag the market down, Walkely says. This opinion is supported by James Allen, an analyst from Cambridge-based research firm Analysys. “I wouldn't say [the market] is necessarily looking up, but it certainly isn't quite as gloomy from my perspective. Realism about 3G networks seems to have set in,” he says.

With that in mind, the next cold bath for the wireless market could come early on Monday morning, as Swedish wireless equipment supplier Ericsson AB unveils its numbers. “With Ericsson being mainly infrastructure focused, we don’t expect to hear good news from Ericsson on Monday,” Walkely says.

— Dan Jones, Senior Editor, Unstrung
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