Motorola Forecasts Rising Smartphone Sales

By Joseph Palenchar -- TWICE, 1/27/2011

Schaumburg, Ill. - Motorola is projecting that it will sell a combined total of 20 to 23 million smartphones and tablets worldwide in the coming year, up from 13.7 million smartphones sold in 2010.

The company didn't break out its tablet projections separately, but the company said it would expand its tablet selection in 2011.

 The previously announced Android-based Motorola Xoom 10.1-inch tablet for Verizon's network will ship at the end of February in 3G form with upgradability to 4G LTE, and the LTE-equipped version will ship in the second quarter, said Motorola chairman/CEO Sanjay Jha. In the second half, Motorola will ship additional tablets, including a 7-inch model and "other form factors," he said.

The company's previously announced Atrix 4G Android smartphone for AT&T will ship at the end of February, and the 4G Droid Bionic smartphone for Verizon Wireless will ship in the second quarter, Jha also said. Both feature dual-core processors delivering 2GHz processing speeds.

Jha outlined the company's tablet plans in releasing a fourth-quarter 2010 financial statement in which the supplier of cellphones and set-top boxes turned a fourth-quarter operating profit of $126 million vs. a year-ago $196 million loss, a net profit of $90 million vs. a year-ago $203 million loss, and a 21 percent gain in sales to $3.43 billion, all on a GAAP basis.

For the full year, however, the company posted a $79 million net loss, though the loss pales in comparison to the year-ago $1.34 billion net loss. Full-year operating earnings, on the other hand, were positive at $76 million in comparison to 2009's full-year operating loss of $1.2 billion. Full-year sales were up 4 percent to $11.5 billion.

Though Motorola's financial performance gained in the fourth quarter, the company forecast a slip in performance in the first quarter of this year, with operating profits falling to around the break-even point and a net loss of around $26 million to $62 million.

In cellphones, the company forecast "significant" first-quarter growth in handset revenues and unit sales, but the segment will nonetheless post an operating loss, though the loss will be "significantly below" the year-ago loss, the company said. In the fourth quarter, the handset division posted an operating profit of $72 million for the quarter compared with a year-ago $166 million loss.

Verizon's iPhone announcement has had an impact on Motorola smartphone sales, Jha noted. Since the announcement earlier this month of the iPhone's February arrival on the Verizon network, Motorola has "seen a little slowdown in the sell-through of our devices," Jha said. Consumer anticipation of the iPhone announcement had an impact before that, he added. "Time will tell" if consumers entering stores to buy a Verizon iPhone will switch to Motorola smartphones once they see a choice of devices on display, he added.

Despite the iPhone impact, Motorola's smartphone sales rose to 4.9 million units in the fourth quarter of 2010 from a year-ago 2 million. For the full year, smartphone sales hit 13.7 million compared with 2009's 2 million. Total cellphone sales, including basic voice-centric phones and feature phones, slipped to 11.3 million in the fourth quarter from the year-ago 12 million as the company continued to shift emphasis toward smartphones. For the year, total handset sales were nonetheless up to 37.3 million from 2009's 37.2 million.

 Within the smartphone segment, mid-tier Motorola smartphones encountered "weakness" in the fourth quarter, largely in the U.S., Jha noted. "With tiered data plans, we expected an accelerated take-up of midtier" smartphones, but "that was not the case," he said. "People continued to buy high-tier smartphones."

Here's how the company's financials stacked up for the fourth quarter and full year:

Consolidated results: Combining set-top box and handset sales, Motorola sales rose 21 percent to $3.42 billion in the fourth quarter and rose 4 percent for the full year to $11.5 billion. Operating profits hit $126 million for the quarter and $76 million for the year, compared with year-ago respective losses of $196 million and $1.21 billion. Net profits hit $90 million for the quarter compared with a year-ago net loss of $90 million, but the company posted a full-year operating loss of $79 million, down significantly from 2009's full-year loss of $1.34 billion.

Handset performance: Sales grew 33 percent in the quarter to $2.42 billion and 9 percent for the year to $7.82 billion.

 Operating profits hit $72 million for the quarter compared with a year-ago $166 million loss, but losses racked up earlier in the year caused a full-year operating loss of $76 million, though the loss was down significantly from 2009's $1.21 billion.