Mot Q3 Results - Early reactions

Motorola Swings to Loss, Guides Lower
10/30/08 - 08:31 AM EDT TheStreet.com

Shares of Motorola jumped Thursday morning, even after the handset maker swung to a third-quarter loss, guided lower for the year and announced it would delay the separation of its mobile phone business. The struggling Schaumburg, Ill., tech giant swung to a loss of $397 million, or 18 cents a share, in the third quarter, compared with a profit of $60 million, or 3 cents a share, in the year-ago period. Excluding one-time items, Motorola had a profit of 5 cents a share. Sales for the first quarter were $7.48 billion, down 15% from a year earlier. Gross margin declined to 24.1% from 28.8% a year ago and 28.4% sequentially.

On average, analysts expected a profit of 2 cents a share on sales of $7.82 billion in the quarter, according to Thomson Reuters. Motorola said mobile-device sales in the quarter were $3.1 billion, down 31% from last year and down slightly from the previous quarter. The division had an operating loss of $840 million in the quarter, compared to a loss of $248 million a year ago. The number of units shipped was 25.4 million, down from 28.1 million in the second quarter.

Performance in Motorola's other segments failed to offset weakness in the handset division. Motorola's home and networks mobility segment sales were $2.4 billion, down 1% from the year-ago quarter. The enterprise mobility segment saw sales rise 4% from a year earlier to $2 billion, although that figure was flat. Looking ahead, Motorola expects earnings in the fourth quarter in a range 2 cents to 4 cents a share, before items. For the full year, it now expects to book a profit of 5 cents a share to 7 cents a share, down slightly from its previous forecast. The Thomson Reuters average estimate is for a profit of 7 cents a share in the fourth quarter and 6 cents a share for the full year.

The company said it would also delay the split of its operations into two separate publicly traded companies. On March 26, the company announced it would seek to splinter off its troubled handset unit. Earlier this week, the company said it will split its home and networks mobility segment into three new units, which will be broadband home solutions, broadband access solutions, and cellular networks. "While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macroeconomic environment, stresses in the financial markets and the changes underway in Mobile Devices," said Co-CEO Sanjay Jha.

The earnings release comes one day after media reports that said Motorola is moving quickly to scale back its struggling cell phone division, simplifying the way it makes devices and cutting additional jobs. Jha, who defected from Qualcomm to head up the wireless unit in August, is spearheading the process, according to reports. Shares of Motorola were jumping 8.8% to $5.94. Competing phone maker Nokia was up 6.8%, while Ericsson slipped 0.3% and Qualcomm was losing 0.7%. Among smart phone makers, Research In Motion rose more than 2%, while Apple was gaining 2.6%.

Motorola Swings to a Loss as Mobile Division Continues to Hurt
October 30, 2008, 8:51 A.M. ET By Kerry E. Grace Wall Street Journal

Motorola Inc. Swung to a third-quarter loss as the company announced it will delay its planned breakup and said results the rest of the year will fall short of expectations.The company posted a third-quarter net loss of $397 million, or 18 cents a share, compared with a net income of $60 million, or three cents a share, a year earlier. The latest results included net charges of 23 cents a share amid its restructuring efforts.

Sales fell 15% to $7.48 billion. In July, the company predicted earnings would be flat to two cents a share. Analysts most recently expected earnings of two cents on revenue of $7.82 billion. Gross margin slid to 24.1% from 28.4% as shipments continue to slump. Motorola shipped 25.4 million handset units in the quarter, down 32%, as it continues to fall from its one-time perch as industry leader. The company's mobile-devices division posted a wider loss of $840 million, as sales slid 31%. The loss included restructuring charges.

Motorola's new cellphone chief, former Qualcomm Inc. executive Sanjay Jha, who became co-chief executive in August, has begun overhauling the struggling division. Since joining Motorola, he has begun cutting back the number of separate operating systems the company uses for its cellphones. He said the intent to separate the company into two separate companies remains intact, but Motorola is no longer expecting that split in the third quarter of 2009 "due to the macroeconomic environment, stresses in the financial markets and the changes underway in mobile Services."

Motorola will divide into two companies, and will split one of those companies -- its home and networks mobility unit -- into three separate businesses for equipment for digital video, Internet-based video and modems, cellular networks and broadband access. Looking forward, Motorola now sees 2008 earnings from continuing operations of five cents to seven cents a share, down a penny from July's forecast, as it projected fourth-quarter earnings of two cents to four cents a share. Analysts surveyed by Thomson Reuters expected seven cents a share for the quarter.

Motorola faces many challenges, not least of which is a lack of new product releases combined with smartphone innovations from competitors -- like Apple Inc.'s iPhone and Sprint Nextel Corp.'s Instinct -- which have led to Motorola's losing a large portion of its market share. Motorola launched its first touch-screen phone during the quarter. Handset makers could face more pressure this year, as the industry is in the early stages of a price war at a time when sales are expected to decline amid a global slowdown in consumer spending.