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Motorola's Q3 Cellphone Revenues Jump 20%

10/28/2010 12:31:40 PM Eastern

Schaumburg, Ill. - Motorola's quarterly cellphone revenues rose for the first time in years during the third quarter, helping the company post its first quarterly sales gain since the fourth quarter of 2006.

 On a year-over-year basis, handset sales surged 20 percent to $2 billion in the fiscal third quarter. Company sales during the quarter rose 6 percent to $5.8 million, including wireless-infrastructure operations that will be sold off to Nokia Siemens. Excluding the infrastructure business, companywide sales shot up 13 percent to $4.9 billion.

 Handset dollar volume turned around markedly in the quarter, having dropped in the second quarter by 6 percent to $1.72 billion and in the first half by 7 percent to $3.37 billion. For the nine-month period, handset dollar volume rose 1 percent to $5.4 billion.

 Although the company posted its sixth consecutive quarterly net profit on a GAAP basis (including and excluding the infrastructure business to be sold off), the handset business posted another in a continuing string of GAAP operating losses, though the losses continued to shrink. For the quarter, the handset business posted a $43 million GAAP operating loss, down from a year-ago $216 million loss. For the nine-month period, the segment posted a $148 million GAAP operating loss, down from a year-ago $1.05 billion operating loss. On a non-GAAP basis, operating profits for the quarter hit $3 million compared to a year-ago $216 million loss.

  For the quarter, the handset unit shipped 9.1 million cellphones, up from the second quarter's 8.3 million and first quarter's 8.5 million but down from the year-ago quarter's 13.6 million. Smartphone shipments in the third quarter rose sequentially to 3.8 million from the second quarter's 2.7 million, the first quarter's 2.3 million, and fourth-quarter 2009's 2 million.

 Motorola co-CEO Sanjay Jha forecast sequential fourth-quarter growth in handset units and dollars, and he said he expects full-year unit sales will hit the upper end of his previous forecasts of 12-14 million units.

The growing mix of smartphones and a de-emphasis on low-tier phones accounted for the handset segment's third quarter surge in year-over-year dollar volume despite the quarter's declining year-over-year unit sales. Average selling prices of Motorola's handsets rose sequentially to $223 in the third quarter from the second quarter's $207.

  Executives also revealed that they plan sometime in 2011 to deliver products that converge mobile devices and computing, presumably in tablet form, and converge mobile devices products with set top boxes. Mobile-set top convergence offers an opportunity for "content linkage" between the two products and for "sharing content back and forth," one executive said during an analyst's conference call.

  The company also reported that North America continued to account for a growing share of its handset revenues, rising to 68 percent in the third quarter from 66 percent in the second quarter and 60 percent in the first quarter, based on 30 percent sequential growth in the company's North American smartphone revenues. Jha, however, said the company plans to step up its sales in overseas markets and continue to diversify its carrier customer base in the U.S. beyond Verizon.

  In other comments, the company said it remains on track in the first quarter of 2011 to split the company into two separate companies, with one company consisting of the handset and setttop box units and the other consisting of the enterprise mobility solutions group.

  In other financial metrics, the company said its quarterly net profit on a GAAP basis, including the infrastructure business to be sold off, rose to $109 million from a year-ago $12 million. Excluding that infrastructure business, net earnings were up only to $7 million from a year-ago loss of $90 million.

  Companywide operating profits grew to $225 million in the quarter compared to a year-ago $11 million loss, excluding the infrastructure operations to be sold off.

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