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Merrill Cuts Motorola to Neutral


Merrill Lynch downgraded Motorola (MOT) to neutral from buy.

Analyst Tal Liani says he sees increasing weakness in the wireless handset market in the third and fourth quarters of 2004. He says Merrill's Crystal Device Index fell 2.4% year over year in July. He notes data from Hirose Electric (a supplier of connectors) points to a 19% drop in orders from Motorola in July and a 15% drop in August.

Data from Murata, BenQ, and Merrill's Electronic Components Order Index also point to a global handset slowdown, and specifically to an excess inventory and order slowdown in China, where Motorola is a market leader. He keeps the 17 cents third-quarter and 20 cents fourth-quarter earnings per share estimates, as he had already projected a drop in handset operating margin.


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