2nd UPDATE: Motorola Swings To Profit; Slow In Comeback
30 April 2010 - 12:37AM
Dow Jones News
Motorola Inc. (MOT) swung to a first-quarter profit as a
stronger economy lifted its networks and enterprise divisions, but
its marquee handset unit continued to struggle with its turnaround
in the competitive smartphone market.
Motorola, which previously warned of weaker phone shipments in
the first quarter, said total phone shipments fell 43% despite an
increase in sales of smartphones.
The results highlight the difficulty of competing against a
flood of alternative smartphone makers in the market even as one of
its devices, the Droid, gets serious backing from the nation's
largest wireless provider in Verizon Wireless. While the company
has rolled out several other devices, none have received the same
kind of buzz or marketing support as the Droid.
"Clearly there's competition at each of our carriers, but I feel
comfortable with where I'm positioned," Co-Chief Executive Sanjay
Jha told analysts during a conference call.
The Schaumburg, Ill., telecommunications equipment maker posted
a profit of $69 million, or 3 cents a share, compared with a
year-earlier loss of $231 million, or 10 cents a share.
Revenue fell slightly to $5.04 billion.
Analysts, on average, had a first-quarter estimate of $5.1
billion in sales and a loss of 1 cent per share.
"The non-handset businesses really came through with higher
profitability," said William Choi, an analyst at Jefferies &
Co.
Co-Chief Executive Sanjay Jha won't have that benefit when
Motorola completes its split, expected to occur in the first
quarter of next year. In addition to the hanset division, which
posted a 9% decline in revenue and an operating loss of $192
million, he will get the profitable home division, which makes
television set-top boxes. Despite an 18% decline in sales, the unit
posted a profit of $20 million.
Things will only get tougher for Jha from here. HTC Corp.'s
(HTCXF, 2498.TW) Droid Incredible is poised to take over Droid's
spot as the flagship smartphone at Verizon Wireless. Research in
Motion Ltd. (RIMM) just unveiled two Blackberrys, and Apple Inc.
(AAPL) is expected to launch the next version of its iPhone in the
summer.
"Where does Verizon Wireless highlight their promotions this
quarter?" Choi asked.
Jha, however, sounded upbeat and said he expects smartphone
shipments to rise sequentially in the second quarter and backed his
expectations of a return to profitability for the mobile devices
unit in the fourth quarter.
The competition has already overtaken one rival. Hewlett-Packard
Co. (HPQ) said it had agreed to buy embattled smartphone pioneer
Palm Inc. (PALM) for roughly $1 billion in cash.
Motorola drew strength from its enterprise mobility and networks
units, run by fellow co-CEO Greg Brown. Both units doubled their
earnings, and the enterprise mobility unit reported a 6% increase
in revenue.
Motorola projected its second-quarter earnings excluding items
at 7 cents to 9 cents a share.
Analysts have an average second-quarter earnings estimate of 3
cents a share.
The strong forecast suggests that the stronger mix of
smartphones is leading to higher margins in the handset division.
Jha has said he expects the unit to post a profit by the fourth
quarter.
Motorola shares rose 4.8% to $7.25 in premarket trading.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com
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