Morgan Stanley has started coverage of European telecoms equipment makers at "in-line", with Nokia at "underweight" and Ericsson and Alcatel at "overweight", the investment bank said on September 26.
The bank gives Nokia a target price of 11 euros, Ericsson a target price of 32 crowns and Alcatel a target price of 13 euros.
"We expect Nokia's market share to decline as Asian vendors with consumer electronics and multimedia expertise, together with a re-invigorated Motorola, fragment the handset industry as we transition to 3G," a Morgan Stanley note said.
"We expect Ericsson's powerful installed base customer relationships to help cushion the impact of price competition. In addition, efficiency in R&D and manufacturing should help drive operating margin higher.
"We believe that the market is underestimating the growth potential of Alcatel's Mobile Communications Group, which we forecast to grow at around 10 percent a year in 2006 and 2007, driven by continued strength in emerging markets," the note added.
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