Research In Motion Results Not Seen Aiding Many Mobile Suppliers
April 03 2009 - 1:55PM
Dow Jones News
Research in Motion Ltd.'s (RIMM) surprisingly strong results
Thursday may give a boost to a few chip makers such as Marvell
Technology Inc. (MRVL), though its doubtful that RIM's gains mean a
stronger market for other suppliers.
Few see the better-than-expected performance of Research in
Motion as a sign of a turnaround in handset demand or even a market
bottom. Components used specifically in the higher-end smartphone
market - RIM's primary customer base - will fare better as that
part of the market grows, but analysts says its unclear to what
extent RIM's growth is a sign of wider demand or simply increasing
market share.
If Research in Motion's results reflect a growing smartphone
market, then many suppliers will benefit; but if RIM is simply
gaining market share, the benefits to many suppliers will be
negligible.
"Let's not get too crazy," Jefferies & Co. analyst Adam
Benjamin said about applying Research in Motion's results to a wide
swath of wireless device suppliers.
On Thursday, RIM convincingly beat expectations for its
fourth-quarter results. The maker of BlackBerry phones made gains
by pushing further into the consumer market, and the company said
nonbusiness users represented roughly 70% of new subscriptions.
Shares were recently up 19% to $58.52.
Marvell has a significant presence across RIM's line of
smartphones, and UBS analyst Stephen Chin called RIM's results
"generally a positive" for Marvell.
FBR Capital analyst Craig Berger agreed and said the stock could
reach $16 as the company benefits from low chip inventories in
mobile and opportunities to gain market share in chips used in
hard-disk drives.
Still, the stock reacted tepidly to the RIM news. Shares were
recently up 1.2% to $9.99.
Even with a strong showing by RIM, investors likely remain
hesitant to dive into Marvell and other suppliers based on the
results because it's unclear to what extent the phone maker's gains
represent the whole smart phone market. Many suppliers sell to a
myriad of smart phone makers, so growth by one phone maker at the
expense of others would reflect mostly negligible shifts.
For example, mobile chip giant Qualcomm Inc. (QCOM) counts RIM
as a customer, but also sells to competitors. And smaller niche
suppliers, such as Synaptics Inc. (SYNA) provide components to
several phone makers.
Qualcomm shares recently fell 25 cents to $41.06, while
Synaptics gained 2% to $29.52.
To be sure, smart phones have held up better than the broader
handset market, and while expectations have been tempered by the
global recession, the market is still expected to grow in 2009.
Companies such as Qualcomm and Marvell will likely fare better
than those with greater exposure to struggling phone makers, such
as Motorola Inc. (MOT) or Sony Ericsson, the joint venture between
Sony Corp. (6758.TO) and L.M. Ericsson Telephone Co. (ERIC).
"Some vendors are very successful because they are tied to a
particular phone category or a particular region. And some
semiconductor companies are very successful because they are tied
to that success," said Jon Erenson, an analyst with research firm
Gartner.
-By Jerry A. DiColo; Dow Jones Newswires; 201-938-5670;
jerry.dicolo@dowjones.com