Schaumburg, Ill. - Motorola posted its fifth consecutive quarterly net and operating profit in its fiscal second quarter as its cellular handset business continued to turn around on rising sales of Android handsets.

In an investor conference call, Motorola also forecast sequential growth in Android shipments in the third quarter and said that companywide sales would grow later this year for the time in 3.5 years.

In the mobile devices segment, sales fell 6 percent in the quarter to $1.72 billion and by 7 percent in the first half to $3.37 billion, but the segment posted its first operating profit in years, though the $87 million in GAAP operating profits included one-time income from a legal settlement. Excluding the settlement, the mobile devices division would have posted an operating loss of $109 million compared to a year-ago $239 million loss. Without the settlement, the handset group would nonetheless have marked its seventh consecutive quarter of reduced operating losses.

Motorola co-CEO Sanjay Jha reiterated his forecast that the mobile devices division would post an operating profit in the fourth quarter without relying on one-time cash influxes. He also said that although Android sales, including sales of Verizon's new Droid X, have exceeded expectations, he will not raise his previous forecast that Motorola would sell 12-14 million Android handsets this year. He cited economic uncertainty, a potential for continued short supplies of parts for high-end smartphones, and "a tremendous amount of uncertainty about the competitive [smartphone] landscape" later this year with RIM's planned launch of its next-generation operating system and the expected launched of Windows 7 smartphones. He noted, however, that "absent supply-chain constraints," Motorola would enjoy "modest increases in shipments beyond the guidance."

In other comments, Jha said:

  • Motorola would launch lower end smartphones in the second half to broaden its mix.

  • Supplies of Verizon's Droid X, launched July 15, would catch up with demand sometime during the third quarter. "Our shipments are relatively healthy," but shortages of components have plagued supplies of the Droid X as well as supplies of many other smartphones, he said.

Jha said the company shipped 2.7 million smartphones in the second quarter, up sequentially from the first quarter's 2.3 million and up from the fourth quarter's 2 million. Total handset shipments, however, were down in the second quarter to 8.3 million from the first quarter's 8.5 million as the company scales back its feature-phone empahasis. The growing mix of smartphones pushed up average selling prices sequentially to $207 from the first quarter's $192, he said.

 For the company as a whole, net earnings in the quarter grew to $166 million from a year-ago $35 million based on continued profitability in the company's other business segments. First-half net earnings hit $234 million compared to a year-ago loss of $193 million. Operating earnings rose to $363 million in the quarter from the year-ago $10 million and to $439 million for the half compared to a year-ago first-half loss of $439 million.

Companywide net sales slipped 2 percent in the quarter to $5.41 billion and 4 percent for the half to $10.5 billion.

Motorola will be an even smaller company by year's end based on an agreement to sell most of its cellular-infrastructure business, excluding patents and the company's iDEN-network business, to Nokia-Siemens.

In other comments, Motorola said it remains on track split in the first quarter of 2011 into two separate publicly traded companies. One company will combine the mobile devices business, which includes portable navigation devices, with Motorola's home businesses, which includes set-top boxes and infrastructure for cable operators.
Release Date: 
2010-07-29 16:02:00
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Abstract Web: 
Schaumburg, Ill. - Motorola posted its fifth consecutive quarterly net and operating profit in its fiscal second quarter as its cellular handset business continued to turn around on rising sales of Android handsets.
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