Motorola Mobility Braces for iPhone on Verizon
By ROGER CHENG
Motorola Mobility Holdings Inc. posted a profit in the fourth quarter amid a surge in smartphone sales, but warned of a weak start to the year for the newly independent company.
The Motorola spinoff sold 4.9 million smartphones in the fourth quarter, more than double a year ago, helped by holiday promotions and a strong tie-in with Verizon Wireless's Droid franchise of high-end phones.
But it will soon have to contend with direct competition from Apple Inc.'s iPhone, which Verizon Wireless plans to sell starting next month.
"It's difficult to tell," Chief Executive Sanjay Jha said in an interview on the potential impact of the iPhone, and how long that impact could last. "There's no indication that [Verizon] will not continue to view Droid favorably."
Motorola Mobility said it expects to post a first-quarter loss of between $26 million, or 9 cents a share, and $62 million, or 21 cents a share, and break even on an operating basis. Mr. Jha said he expects to still post an operating profit for the year.
The company's shares fell nearly 5% to $33.15 in after-hours trading.
The results and forecast mark an early barometer of Motorola Mobility's ability to handle the pressures of the highly competitive smartphone business. Following its split with sister Motorola Solutions Inc. at the beginning of the year, Motorola Mobility is smaller, nimbler and more focused on its core mobile devices business. But it also lacks the financial flexibility and breadth of some of its larger rivals, and could be more exposed to outside factors such as the iPhone.
The company, which also sells television set-top boxes, had a profit of $80 million, or 27 cents a share, in the quarter. It posted a loss of $204 million, or 69 cents a share, a year ago. Revenue rose 21% to $3.43 billion.
"The quarter wasn't anything great relative to expectations," said Matthew Thornton, an analyst at Avian Securities. He noted the smartphone sales, while up dramatically from a year ago and the third quarter, disappointed most analysts.
Motorola has a number of products to throw against the iPhone. In February, it will release the Xoom tablet, which is the first to use a version of Google Inc.'s Android software specifically designed for tablets.
In the second quarter, Motorola will release one of Verizon Wireless's first 4G phones in the Droid Bionic. AT&T Inc. will sell its Atrix 4G, a smartphone that can dock and act as the brains of a laptop, in the first quarter.
"Clearly, we've diversified ourselves," Mr. Jha said.
The mobile devices, which represent a majority of the business, generated revenue of $2.4 billion and a loss of $72 million. On an operating basis, it posted a profit of $56 million. The home business reported revenue of $1 billion and a profit of $54 million.
Write to Roger Cheng at roger.cheng@dowjones.com
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