Morgan Keegan’s Q2 Handset Review (AAPL, RIMM, LGL, NOK)

Morgan Keegan is out with its second quarter handset review this morning, where they analyze the Q2 results form the publicly available information on handset providers constituting 79% of the industry’s volume and the vast majority of the industry’s revenues/profits. They found out that Q2 was a weak month for nearly everyone in the industry relative to normal seasonality; companies were faced with severe ASP and margin pressure, driven, as the MK analysts surmise, at least partly by the strong U.S. Dollar. They also cited the “substantial lack of ‘flagship’ launches” as well for the results. They said, “Excluding Chinese and small vendors, industry units grew just 9% Y/Y with revenues down (1%) sequentially on a US Dollar basis, and EBIT margin down (190 bps) sequentially, both of which are seasonally abnormal. Against this backdrop, Qualcomm's QCOM guidance for sequential device sales growth of 6%-14% looks aggressive based on historical trends, but not unachievable depending on the 3G mix for the industry.” The MK analysts also said that Apple AAPL, Research in Motion RIMM and HTC generated 78% of industry’s earnings with as little as 8% of the industry’s unit volume. LG LGL, Samsung and Nokia's NOK share of industry profits declined sharply. The Morgan Keegan analysts also said that they see Q3 and Q4 being significantly better for the industry.