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Handsets up, China down for Motorola

Maintains profit run

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Motorola has posted a net profit for a third consecutive quarter, but earnings projections for the full year have been cut.

The Chicago-based company reported a first quarter net profit of USD169 million, or USD0.07 a share, compared with a loss of USD449 million, or USD0.20 a share, a year earlier. This is the third straight quarter that it has posted a net profit, following six quarters of losses.

In the fourth quarter, the company reported sales of USD7.5 billion, up 3 percent over the same period in the previous year and higher than Wall Street expectations.

Revenue for the first quarter fell 2.2 percent to USD6 billion from USD6.2 billion last year. Motorola also provided a second-quarter revenue estimate of between USD6.4 billion and USD6.6 billion, down from a year earlier.

Meanwhile, full-year earnings are now expected to be USD0.35 to USD0.40 a share, compared with its previous guidance of USD0.40. The year's revenue target was also revised to USD27.5 to USD28 billion from its previous estimate of USD27.5 billion.

First quarter revenues at Motorola's handset division, which is the company's largest, rose by 2 percent to USD2.4 billion. However, orders fell 6 percent to USD2.5 billion.

The company also said that handset shipments for the first quarter were up by 18 percent to 16.7 million, compared to a year ago, reflecting a continuing shift towards selling lower end handsets. Motorola said its global market share rose to 19 percent from 16 percent a year ago.

Bad news for the company was that market share in China, which is a major source of growth for the company and where it is the market leader, has fallen by more than 5 percent because of increased competition from local handset suppliers.

There were mixed results for other important divisions. Revenues from semiconductors rose by 2 percent to USD1.2 billion, but orders fell 16 percent. The wireless infrastructure division saw revenues fall by 12 percent. The company's broadband cable business, saw sales fall 23 percent to USD405 million, while orders fell 36 percent to USD343 million.

Despite this, the company's stock surged in after-hours trading on Instinet to USD8.40 from the NYSE closing price on Tuesday of USD7.94.

Mike Zafirovski, president and chief operating officer, said the profitable results were continuing evidence of the effectiveness of Motorola's restructuring. The company has laid off about 40 percent of its staff, or 60,000 employees, in recent years.

The company also announced on Tuesday that it had entered into an agreement to buy Winphoria Networks, a maker of packet-based switching centres for wireless networks, in an all-cash deal. The value of the deal wasn't disclosed. © ComputerWire

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