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Extracted from cnnfn.. VSH, KEM and AVX eventually will rise big time...just be patient

NEW YORK (CNNfn) - The stocks of the leading makers of mobile phones and mobile phone components declined Thursday after an analyst research report said that Motorola Inc., one of the industry's largest players, informed its suppliers that it would produce fewer handsets than it had previously forecast.

According to a note issued by Lehman Brothers analyst Tim Luke, Motorola held a conference call in which it told its suppliers that it would produce about 85 million cell phones this year. That would be below an earlier goal of up to 100 million units, Luke's note said.

However, a Motorola spokesman said Thursday afternoon that no such conference call occurred and that the company hasn't changed its guidance regarding sales of mobile phones. The communications giant had a generally upbeat meeting with analysts on Tuesday, at which it forecast that its revenue for the full year would be $39.5 billion and its earnings per share would be $1.05

"There was no conference call last night, we have not changed our guidance to analysts, nor have we told our suppliers anything different than we have for the last 30 days or so," said Motorola spokesman Rusty Brashear. "At our analyst meeting, we projected that sales of handsets would grow 25-to-30 percent in the second half, on a dollar basis."

Makers of phone components hurt also

On July 21, Ericsson, the world's biggest supplier of equipment for cellular phone networks, announced that its phone handset unit would post a loss for the whole business year, saying sales of its highest-priced phones are dwindling as a share of the total.

Concerns about the growth rate of the mobile phone industry also have hurt the makers of phone components over the past two weeks. In midday trading Thursday, AVX Corp. (AVX: Research, Estimates) was down 1-5/8 at 21-5/8, Epcos AG (EPC: Research, Estimates) had plunged 11-3/16 to 80-1/16, Kemet (KEM: Research, Estimates) was off 1 at 23-3/4, and Vishay Intertech (VSH: Research, Estimates) lost 1-1/4 to 27-3/4.

Merrill Lynch analyst Jerry Labowitz said in a research note today Thursday that Motorola's forecast of mobile phone unit volume shouldn't have any impact on his 2000 or 2001 earnings estimates for those companies.

"As investors react to concerns regarding cell phone production, the shares of the passive component makers we follow have been plummeting despite further momentum in the business, higher earnings expectations and record low valuations," Labowitz said in a research note.

"Kemet estimates that sales to handset makers account for 20 to 25 percent of their capacitor unit shipments, 7-to-8 percent of total revenues, and around 5 percent of profits," Labowitz wrote. "We think Kemet is the largest supplier of tantalum capacitors to Motorola and has more exposure to Motorola than AVX and Vishay, but is also well positioned at other leading wireless makers such as Nokia."
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