Motorola posts small profit as phone sales beat
NEW YORK (Reuters) - Motorola Inc (MOT.N) posted a small quarterly profit after more than a year of disappointing results, as it sold more mobile phones than expected due to strength in North America, sending its shares up 13 percent.
The company, which narrowly kept its No. 3 ranking in the global phone market ahead of LG Electronics Inc (066570.KS), also forecast a full-year profit that beat Wall Street estimates as it plans new products and further cost cutting.
The news prompted analyst hopes that Motorola may have put the worst behind it, though it may face new challenges such as steep price cuts from leader Nokia (NOK1V.HE).
"Based on all the evidence I would say they've hit bottom, not improving much but not free falling," said Charter Equity Research analyst Ed Snyder. "But if Nokia is cutting prices then it's bad for everybody including Motorola."
Nokia cut the prices of many phones by up to 10 percent in late July, according to market data and industry sources.
Motorola Chief Executive Greg Brown said he is banking on new phones for growth, including a new touch-screen device for North America and other regions this year.
"There's still much work that needs to be done," said Brown in a phone interview. "The competitive landscape remains intense. Having said that, we also are not standing still and will be adding substantially to our product portfolio."
He told analysts in a conference call that Motorola, which faces stiff competition from products such as Apple Inc's (AAPL.O) popular touch-screen iPhone, would launch 50 new phones this year including advanced handsets.
Motorola plans to separate its mobile phone unit from the rest of the company in the third quarter of 2009. Before separating the unit, the company wants to improve profitability for mobile devices and make its results more predictable.
PHONE SURPRISE
The company shipped 28.1 million phones in the second quarter and maintained its share of the market ahead of Korea's LG Electronics. Nine analysts surveyed by Reuters had on average expected shipments to total 26.6 million phones.
"They've managed to minimize handset share losses even in the face of fairly aggressive competition particularly from the Koreans in North America," said Nomura analyst Richard Windsor, referring to LG and Samsung Electronics Co (005930.KS), the global No. 2 phone maker.
Motorola's second-quarter profit was $4 million and broke even on a per share basis, compared with a loss of $28 million, or 1 cent a share, in the year-earlier quarter.
Excluding charges, Motorola earned 2 cents per share, beating the average Wall Street forecast of a loss of 3 cents per share, according to Reuters Estimates.
Revenue fell 7 percent to $8.1 billion but topped the average analyst forecast of $7.7 billion.
Motorola, which has failed to come up with a strong follow-up to its once-lauded Razr phone, has lost out to Nokia and others since early last year as it has been hurt particularly by a lack of phones with high-speed Web links.
Brown promised that half Motorola's new phone portfolio in 2009 would be high-speed phones, up from 15 percent in 2008.
"It allows us to play in a marketplace where we've had a challenged portfolio," said Brown on a call with analysts.
Motorola forecast third-quarter earnings per share from continuing operations in a range of break-even to 2 cents. It said its outlook excludes charges from its operating expense reduction initiatives or other items.
Brown said the mobile device unit's profitability would improve in the third quarter even as sales fall slightly versus the second quarter before improving again in the fourth quarter. It posted an operating loss of $346 million on revenue that fell 22 percent to $3.3 billion in the second quarter.
Motorola forecast a full-year profit from continuing operations of 6 cents to 8 cents per share, against analyst expectations for a 3 cents a share profit.
"It still has a mountain to climb," said Geoff Blaber, an analyst at CCS Insight. "Its product portfolio is still not competitive enough and sustaining its position in the North American market in the second half of 2008 may prove challenging."
Motorola's television set-top box and networks equipment division posted operating earnings of $245 million, up 28 percent from a year earlier on sales of $2.7 billion, which were up 7 percent. Its enterprise unit saw sales rise 6 percent to $2 billion from the year-ago quarter.
Motorola shares rose to $8.70 from their New York Stock Exchange Thursday close of $7.68 after falling more than 70 percent since October 2006 when Motorola's financials started to falter.
(Additional reporting by Tarmo Virki in Helsinki; Editing by Steve Orlofsky and Derek Caney)
