Motorola product delay, tablet margins to hurt Q3

NEW YORK Thu Jul 28, 2011 5:54pm EDT

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NEW YORK (Reuters) - Motorola Mobility warned that its third-quarter profit would miss expectations due to the second delay of a smartphone launch and price cuts of its tablet computers, sending its shares down 4 percent.

Chief Executive Sanjay Jha acknowledged that Motorola's Bionic, a high-speed device for Verizon Wireless, would be delayed until September. He had already the delayed the phone's launch from the second quarter to the summer.

Jha also noted that gross margins would be worse than expected in the third quarter, the result of Motorola's decision to cut the price of the Xoom tablet to compete with rivals such as Apple Inc's iPad.

The executive said he had misjudged pricing in the highly competitive tablet market but vowed that Motorola's profit would be back on track in the fourth quarter, when he promised to introduce more competitive products.

"We now recognize where the price points are," Jha told Reuters. "For the fourth quarter we'll launch very good, new tablets and we'll have a good quarter."

The company gave a third-quarter earnings target ranging from break even to 10 cents per share, excluding unusual items, compared with analyst expectations for 24 cents a share, according to Thomson Reuters I/B/E/S.

"It's all lining up to be a weak quarter that's going to ripple though to the end of the year," said Charter Equity Research analyst Ed Snyder.

Motorola's full year forecast for 2011 of 48 cents to 60 cents per share missed Wall Street expectations for 71 cents per share.

For the second quarter, it reported a loss of $56 million, or 19 cents per share, compared with a profit of $80 million, or 27 cents per share, a year earlier.

Excluding unusual items Motorola earned 9 cents per share in the quarter, ahead of analyst expectations for 6 cents a share according to Thomson Reuters I/B/E/S.

Revenue rose to $3.3 billion, beating the average analyst estimate of $3.12 billion, according to Thomson Reuters I/B/E/S.

Motorola said on Thursday it shipped 4.4 million smartphones in the quarter, in line with expectations from six analysts contacted by Reuters. It has also sold 440,000 tablet computers, ahead of analyst expectations for about 366,000.

Motorola shares fell to $22.01 in after-hours trading, down 3.9 percent for their $22.91 close on the New York Stock Exchange.

(Reporting by Sinead Carew; editing by Robert MacMillan, Andre Grenon and Tim Dobbyn)

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