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HOME PAGE FOR THE WORLD'S BUSINESS LEADERS

Home > Business

Telecommunications

Investors Still Turned Off By Wireless Stocks

Mark Lewis, 03.04.02, 12:19 PM ET

NEW YORK - The Blackberry has begun to talk, signaling the quickening convergence of wireless voice and data. But investors still turned a deaf ear to the overall wireless sector out of increasing concern that today's leaders might not make it to the promised land.

On Monday, Research In Motion
(nasdaq:
RIMM -

news
-

people
) introduced a voice-enabled model of its Blackberry portable e-mail device. Handspring
(nasdaq:
HAND -

news
-

people
) already has begun offering its Treo, which combines the functions of the personal digital assistant and the traditional cell phone, plus wireless Internet access.

More on Research In Motion

Tear Sheet

Blackberry Gets Chatty

Both Research In Motion and Handspring were trading sharply higher Monday morning, but the traditional wireless stocks, such as AT&T Wireless
(nyse:
AWE -

news
-

people
), continued their months-long decline. One might think AT&T Wireless at least would get a little boost from Research In Motion's news, since the AT&T Wireless network will carry some of the traffic generated by the voice-enabled Blackberry 5810. But wireless investors tuned out the positive implications and listened instead to analysts such as Goldman Sachs analyst Paul Wuh, who today turned negative on the wireless sector.

"We are downgrading the U.S. wireless sector to market underweight," Wuh said in a research note. "Given AT&T Wireless' negative statements on its conference call last Friday about increasing pricing pressure from which we feel no U.S. carrier will be immune, plus our weaker outlook for wireless data after the recent GSM (global system for mobile communications) Congress in Cannes, we are now more skeptical about improving fundamentals during the second half, even with a strengthening economy."

AT&T Wireless on March 1 warned that some of its first-quarter numbers would fall short of Wall Street's expectations. So too will its operating cash flow for full-year 2002. The firm said its performance would strengthen in the second half of the year after a first-quarter hiccup, but investors were not comforted: The stock fell about 15% that day to an anemic $8.60.

Wuh cut his ratings on AT&T Wireless on Monday to "market outperformer" from Goldman's Recommended List. He downgraded Sprint PCS
(nyse:
PCS -

news
-

people
) to "market performer" from "market outperformer" and he cut Nextel Communications
(nasdaq:
NXTL -

news
-

people
) to "market performer" from the Recommended List. All three stocks were off significantly in morning trading, even while the overall market was soaring.

Jonathan Atkin, an analyst for RBC Capital Markets, said that February sales for the wireless firms appeared to have held up reasonably well, especially for Nextel and for Verizon Wireless, co-owned by Verizon Communications
(nyse:
VZ -

news
-

people
) and Britain's Vodafone Group
(nyse:
VOD -

news
-

people
). But Atkin said in a research note that he remained cautious on the sector, "given weakening or uncertain operating fundamentals at many carriers and no apparent near-term catalysts."

The longer-term catalyst for these stocks is supposed to be third-generation (3G) wireless services, which supposedly will prompt consumers and business users to rely on devices like the Treo for all sorts of value-added broadband applications, greatly padding the monthly checks they send to the wireless firms. But this long-term 3G payday seems ever more elusive for the sector, even while the near-term challenges become more formidable.

Amid the growing pessimism, not even today's unveiling of the talking Blackberry could help this sector. The Blackberry's voice was lost in the echo from last week's AT&T Wireless warning, and the sector continued its slide.

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AWE

6.68

- 0.18

HAND

0.92

- 0.02

NXTL

12.61

- 0.76

PCS

4.17

- 0.23

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13.42

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VOD

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1/24/03 1:19:00 PM ET

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