AP
Motorola posts small 2Q profit, beats expectations
Thursday July 31, 5:44 pm ET
By Peter Svensson, AP Technology Writer
Motorola beats expectations with small 2Q profit, sells more cell phones; shares jump


NEW YORK (AP) -- In a sign that it may be finally turning its fortunes around, Motorola Inc. surprised investors Thursday by reporting a small profit for the second quarter and revealing it had shipped more cell phones than in the first quarter. Its shares soared.

The unexpected profit was the result of a sales increase across all units from the first quarter, helped by cost cuts. The company has laid off more than 10,000 workers since last year.

The Schaumburg, Ill.-based company earned $4 million, less than 1 cent per share, in the three months ended June 30. That includes accounting charges of 2 cents per share.

Analysts polled by Thomson Financial had been expecting a loss of 3 cents per share.

In the same quarter a year ago, Motorola lost $28 million, or 2 cents per share.

Its sales fell 7.4 percent to $8.1 billion, but that exceeded the $7.7 billion that analysts were predicting.

Motorola shares rose 96 cents, or 12.5 percent, to $8.64 Thursday.

The company shipped 28.1 million cell phones, up from 27 million in the first quarter, and said it maintained its share of the global handset market.

According to research firm IDC, Motorola's market share actually slipped slightly from 9.4 percent of the global market in the first quarter to 9.2 percent in the second, but the company narrowly maintained its third-place ranking, just above South Korea's LG Electronics Inc., with 9.1 percent. Nokia Corp. is the largest maker of cell phones, followed by Samsung Electronics Co.

Chief Executive Greg Brown said Motorola expects to sell slightly fewer cell phones in the current quarter, then see sales rise again in the fourth quarter. The company is putting out 50 new phone models this year, compared to about 40 last year. It is also aiming to strengthen its presence in the "smart" phone market, which has grown strongly in the last year, with more phones that have full-alphabet keyboards or touch screens.

Motorola rode high a few years ago on sales of its Razr phone, but has failed to come up with an equally popular follow-up. In the most recent quarter, Motorola's big seller was the low-end W series of phones, and Chief Financial Officer Paul Liska said the average selling price of its handsets was down slightly. The Razr still outsold its intended replacement, the more expensive Razr 2, by about 3 to 1.

Facing increasing investor discontent, Motorola said in March that it plans to spin the handset business off into a separate publicly traded company. Liska reaffirmed the company's commitment to the spinoff in a conference call with analysts, some of whom questioned the wisdom of the plan.

Liska said the company expects to complete the spinoff in the third quarter of next year. Motorola had previously said only that it would be accomplished some time next year.

The cell phone unit, Motorola's largest by sales, posted an operating loss of $346 million, but the other two units, which together make up more than half the revenue, made up for that loss.

The Home and Network Mobility unit posted an operating profit of $245 million, helped by demand from cable operators for more advanced TV set-top boxes and faster cable modems.

The Enterprise Mobility Solutions division posted $377 million in operating profit, driven by strong international demand for police radios and corporate communications gear.

Motorola also said it expects an operating profit of 6 cents to 8 cents per share for the full year, excluding potential charges for restructuring initiatives and other one-time events.

For the third quarter, the company expects to break even or earn up to 2 cents per share on the same basis.

Analysts polled by Thomson Financial had been expecting earnings of 1 cent per share for the full year and for the third quarter.