Motorola Jumps After Forecasting Profit That May Beat Estimates
By Hugo Miller
Oct. 29 (Bloomberg) -- Motorola Inc. climbed the most in three months after the biggest U.S. mobile-phone maker predicted fourth-quarter profit that may exceed analysts’ estimates and as job cuts helped it beat projections for the previous period.
Profit, excluding some costs, will be 7 cents to 9 cents a share, Schaumburg, Illinois-based Motorola said today. Analysts in a Bloomberg survey projected 6 cents. Third-quarter profit on that basis was 2 cents a share, topping the average prediction for a breakeven quarter.
Motorola has eliminated at least 8,000 jobs since December and shuffled executives after posting losses of more than $4 billion in the past two years. The company aims to recover market share lost to Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry by introducing phones that run Google Inc.’s Android software, including the Droid and the Cliq.
“They have been very effective in cost cutting and the Droid really is the best device Motorola has come up with since 2005,” said Tero Kuittinen, an analyst at MKM Partners LP in Greenwich, Connecticut. “Now they need a string of hits.”
Motorola climbed 86 cents, or 11 percent, to $8.82 at 12:33 p.m. on the New York Stock Exchange, and earlier rose as high as $8.97 for the biggest intraday gain since July 30. Before today, the stock had advanced 80 percent this year.
Droid, Cliq
Net income was $12 million, or 1 cent a share, after a loss of $397 million, or 18 cents, a year earlier. Job cuts helped Motorola reduce production costs by 36 percent to $3.65 billion.
Revenue dropped 27 percent to $5.45 billion. Analysts predicted $5.54 billion on average.
The company also named Edward Fitzpatrick chief financial officer, effective immediately. Fitzpatrick, 43, had been Motorola’s acting CFO since February.
Motorola’s share of the global mobile-phone market dropped by almost half in the second quarter to 5.6 percent, according to Stamford, Connecticut-based research firm Gartner Inc. Apple and RIM gained, helped by increasing demand for phones that surf the Web, send e-mail and shoot video.
Revenue at Motorola’s mobile-phone business fell 46 percent to $1.69 billion in the third quarter, as shipments plunged by almost half to 13.6 million handsets. The division’s operating loss narrowed to $183 million from $840 million.
Yesterday, Motorola introduced its second phone based on the Android software, the Droid, after unveiling the Cliq last month. Both cost about $200 on a two-year contract and go on sale in November for the holiday shopping season.
Android as Growth Driver
The Droid features a larger screen than the iPhone and allows users to run multiple applications at once. The device gets Motorola back in the market for high-end phones, from which it has been missing, co-Chief Executive Officer Sanjay Jha, who runs the mobile-phone unit, said in an interview this week.
“This is a rebuilt company, with new leadership and a new platform,” said Matt Thornton, an analyst at Avian Securities LLC in Boston. “If these guys are successful in making the transition to be a smart-phone player, the next four to six quarters could show some marked improvement.” Thornton has a “positive” rating on the stock.
The “vast majority” of Motorola smart phones introduced in 2010 will be Android devices and the company is considering extending the operating system to its more basic phones, Jha said today on a conference call.
Motorola’s smart-phone sales will be a “significant driver” of its financial performance next year, he said. “I will be surprised if we don’t break even in at least one quarter in 2010,” he said, referring to the mobile-phone unit.
Scanners, Set-Top Boxes
The company’s other units are run by co-CEO Greg Brown. Profit at the home-entertainment unit, which builds television set-top boxes, fell 24 percent to $199 million as sales fell 15 percent to $2.01 billion.
Motorola expects “a bit of an uptick” in the unit’s fourth- quarter sales from the third quarter, while revenue should still be below year-earlier levels, Fitzpatrick said in an interview.
The enterprise mobility unit, which sells bar-code scanners to retailers and supplies emergency and police departments with walkie-talkies, posted a 24 percent drop in profit to $306 million as sales fell 13 percent to $1.77 billion. That business is “starting to see signs of stability,” Fitzpatrick said.
Motorola is making progress on its plan to split off its mobile-phone unit from the rest of the company, Jha said in an interview today. The timing of that move will depend on “the economy, the progress of the mobile-devices business and the stability of the handset market,” he said.
To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net
Last Updated: October 29, 2009 12:35 EDT |
