Motorola shares up after profit beats estimates

NEW YORK (Reuters) - Motorola Inc (MOT.N) reported on Thursday its first quarterly profit in 2007 and gave an outlook that beat Wall Street expectations, in a sign the mobile phone maker has started to turn around its business.

Shares of Motorola rose as much as 5 percent as investors took heart from the results, which came after two quarters of losses, even though third-quarter profit still fell 94 percent as the company lost mobile phone market share to such rivals as Nokia and Samsung Electronics.

RBC analyst Mark Sue said the results were encouraging but noted that Motorola has a lot of work to do as competition in mobile devices had intensified in the past year.

"It's stopped getting worse for Motorola," he said. "The handset division is still operating at a loss but the loss is narrowing which suggests the light at the end of the tunnel is getting a little bit brighter. It's about sustainability."

While Motorola lost market share in the Asia Pacific region, including India, it regained its lead in Latin America and kept its lead in North America, executives said.

Motorola has been losing market share to No. 1 mobile phone maker Nokia (NOK1V.HE) and to Samsung Electronics (005930.KS), which took its No. 2 ranking in the second quarter. It also faces competition from Apple Inc's (AAPL.O) iPhone.

Third-quarter net profit was $60 million, or 3 cents a share, compared with $968 million, or 39 cents a share, in the year ago quarter.

Excluding discontinued operations and charges from job cuts and asset writedowns, Motorola's profit was 6 cents a share, ahead of the average analyst estimate of 4 cents a share, according to Reuters Estimates.

"Our third quarter can be characterized by one word, progress," Chief Executive Ed Zander said on a conference call. "We also recognize there is a lot more work to be done."

Revenue fell 17 percent to $8.8 billion, in line with average analyst estimates, according to Reuters Estimates.

MORE PROFITS EXPECTED

It forecast fourth-quarter earnings per share from continuing operations of 12 cents to 14 cents, excluding any reorganization charges or other items, compared to the average analysts forecast of 11 cents, according to Reuters Estimates.

Motorola shipped 37.2 million cell phones in the quarter, giving it an estimated market share of about 13 percent.

The handset business posted an operating loss of $138 million compared with a profit of $843 million a year ago. Mobile phone revenue fell 36 percent to $4.5 billion.

Zander said in an interview that mobile phone demand did not appear to be affected by U.S. economic concerns so far in the fourth quarter. Motorola said that the total mobile market tends to increase in the double digit percentage range from the third quarter to the fourth quarter.

Asked by analysts about plans for share repurchases, Motorola's Chief Financial Officer Tom Meredith hinted that the company could have some news on this in coming weeks. He noted that the company had about $4 billion left to spend on its roughly $11 billion share repurchase plan.

The company, which has been cutting jobs to lower costs, ended the quarter with 67,000 employees, down from 72,000.

American Technology Research analyst Mark McKechnie said Motorola had cut costs faster than expected. "They're doing good but not great," he said. "It's decent progress for a company in turnaround mode."

Motorola said revenue for its set top box and network equipment business increased 6 percent from the year-ago quarter. Its enterprise business posted a 47 percent revenue increase to $2 billion.

Shares of Motorola, which has been criticized for failing to come up with a strong successor to its flagship Razr phone, had lost almost a third of their value in the last 12 months.

The stock was up 5.6 percent, or $1.04, at $19.58 in midday trade on the New York Stock Exchange.