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S&P: Still Buy Motorola


Motorola (MOT): Reiterates 5 STARS (buy)

Analyst: Kenneth Leon, CPA

We think the current weakness in Motorola shares is an enhanced buying opportunity, and reflects concern about its losing market share from wireless systems, including its largest customer Nextel (NXTL). The growth engine for Motorola is wireless handsets, and we are confident the company should execute better than in the past. We believe Nextel is likely to keep Motorola as a primary vendor, despite its trial of Flarion Technologies' 3G wireless system. We still expect the company's six business units to realize double-digit growth in 2004. We maintain our 12-month target price of $25, using a sum-of-the-parts valuation.

C-Cor.net (CCBL): Reiterates 4 STARS (accumulate)

Analyst: Ari Bensinger

We continue to believe that network management software will become a critical spending component for cable operators as they launch enhanced services, such as voice over Internet Protocol. However, since software sales are dependent upon lengthy customer acceptance schedules, we see them remaining lumpy throughout calendar year 2004. We are incorporating a higher risk profile into our blended valuation model due to our expectations of strong but uneven earnings growth. As a result, we are lowering our 12-month target price to $13 from $15.

Nortel Networks (NT): Reiterates 3 STARS (hold)

Analyst: Kenneth Leon, CPA

We believe Nortel shares may trade higher on June 21 on unconfirmed reports that the company and Cisco Systems (CSCO) may consider a partnership. CBS MarketWatch reported that the CEOs of both companies met during a Canadian telecom conference last Friday. While we see most products and services overlapping between the two companies, in our opinion Nortel's CEO may be thinking about narrowing its firm focus in the enterprise and service provider markets, given its problems with regulators. Trading below peers on price-to-sales and price-to-book value, we would hold Nortel shares.


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