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Thursday, October 19, 2006

Cell Phone Nation: You Never Hear The Shot That Kills You (MOT)(NOK)

Nokia announced a strong quarter, sort of. Revenue rose 20% and net was down 4%, largely due to resructuring charges.

But, the huge cell phone manufactuer said that the price of its phones dropped from 102 Euros in Q2 to 93 Euros in Q3. While Nokia sell a lot of high end, multimedia phones, the cheap phones are overwhelming that trend.

Nokia's shares dropped as much as 4% on the news, hitting $19.05. That is down from a 52-week high of $23.47.

The company believes that global cell phone sales will hit 970 million this year, a higher forecast than most competitors have given in the past.

Cheap phones. Not good.

Add that to Motorola's results, hurt by slowing cell unit sales. The company shipped 53.7 million phones in Q3. Wall St. was looking for 56 million. And, someone is counting, because Motorola's stock dropped over 6% over the two days since earnings, down to $23.33.

Poor unit sales. Also, not good.

According to Bloomberg, global cell unit sales growth will drop below 10% in 2007. It has been five years since that last occurred.

Of course, as AMD and Intel have demonstrated over the last year, companies often resort to price cutting to keep share when a large market is no longer growing quickly.

So, Motorola, Ericsson, and Nokia shareholders have to ask themselves what the hell is going on.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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