Sony Ericsson Warning Bad For Motorola (MOT) And Nokia (NOK)

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Large handset company Sony Ericsson said it would miss Q1 earnings because of lack of handset demand. The company said it will only ship 22 million handsets for the period, which would be flat with last year.

"Slowing market growth of mid to high-end phones in markets where Sony Ericsson has a strong presence is affecting sales," according to a statement picked up by Reuters.

If handset sales are starting to flatten due to a bad economy, Nokia (NOK), which sells 40% of the world’s mobile phones, is likely to be hurt badly. But, it has a strong balance sheet and good margins.

The other company which will suffer is Motorola (MOT), a firm which has absolutely no margin for a poor market. The US company’s shares trade at $9.74 down from a 52-week high of $19.68. Motorola is trying to sell its handset unit, but if its finances are getting worse, that may be next to impossible. Last year, Motorola revenue from handsets was down 33% and the firm lost $1.2 billion in that part of its business.

Motorola’s shares may look inexpensive below $10, but they almost certainly are not.

Douglas A. McIntyre