Bloomberg
January 23, 2008
By Ville Heiskanen
(Bloomberg) -- Motorola Inc., the biggest U.S. mobile-phone maker, forecast an unexpected loss after profit fell 84 percent last quarter as customers fled to Apple Inc. and Samsung Electronics Co.
Motorola dropped as much as 18 percent in New York trading. That's the biggest decline in more than five years and puts the stock at its lowest since September 2003, when Chris Galvin was still running the company.
Phone sales will drop ``significantly'' in the next three months after plunging 38 percent in the fourth quarter, CEO Greg Brown said today on a conference call. Motorola devices such as the Razr 2, the sequel to its best-selling model, are failing to keep consumers away from Apple's iPhone and Samsung's Sync camera handset.
``Their phones are just not selling through, they're struggling with their lineup,'' Piper Jaffray & Co.'s Michael Walkley said in an interview. ``The overall health of the market is fine; these problems are Motorola-specific.'' The Minneapolis- based analyst advises investors to hang on to the stock and doesn't own any himself.
The company predicted a first-quarter loss of 5 cents to 7 cents a share, excluding costs for job cuts and other items. Analysts on average projected a profit of 10 cents.
Motorola shipped about 1.5 million Razr 2s in the fourth quarter, Brown said in an interview. Walkley had projected about 2.5 million in shipments for that period.
Motorola, based in Schaumburg, Illinois, fell $2.02, or 16 percent, to $10.30 at 9:33 a.m. on the New York Stock Exchange, the biggest drop since October 2002. Before today, the shares had dropped 34 percent in the past year.
Declines
Fourth-quarter net income fell to $100 million, or 4 cents a share, from $623 million, or 25 cents, a year earlier, the company said. Sales declined 18 percent to $9.65 billion.
Motorola is the third major technology company to report disappointing results in the past week, heightening concerns customers are spending less amid slowing economic growth. Both Intel Corp. and Apple slumped after their sales forecasts fell short of analysts' projections.
Sales in the mobile-phone unit fell 38 percent to $4.8 billion. The division shipped 40.9 million phones, compared with 65.7 million a year earlier. The unit's loss was $388 million, compared with a profit of $341 million a year earlier.
Excluding costs for job cuts, fourth-quarter profit was 14 cents a share, topping the 13-cent average projection of analysts. Sales met the $9.64 billion average of estimates compiled by Bloomberg.
`Challenging Quarter'
``The first quarter will be a challenging quarter,'' Brown said. ``We've got to refresh the product portfolio as soon as we can.'' The company probably will lose market share, he said.
Brown became chief after Ed Zander resigned in November. Zander, who came in after Galvin, had revived Motorola with the Razr, only to see its cachet fade amid gains by Nokia Oyj. Other gainers include Samsung, which supplanted Motorola last year as the world's second-biggest maker of mobile phones.
Now Sony Ericsson Mobile Communications Ltd., the fourth- largest handset maker, is threatening Motorola's third-place spot. The company posted an 18 percent increase in unit shipments last quarter and may overtake Motorola this year, according to a report from Cowen & Co. analyst Matthew Hoffman in Boston.
Motorola's share of global phone sales fell to 13.1 percent in the third quarter from 20.7 percent a year earlier, according to Stamford, Connecticut-based researcher Gartner Inc.
Rivals Gain
Nokia increased its market share to 38.1 percent in the third quarter, while Samsung boosted its share to 14.5 percent, according to Gartner. Sony Ericsson lifted its share to 8.8 percent.
To prevent Motorola from slipping further, Brown, 47, plans to start selling the Moto Z10 for shooting and editing video and the Rokr E8, which holds about 5,000 songs and includes a camera. Today Motorola also announced plans to use more Qualcomm Inc. chips in phones, a move Brown said will help the company broaden its lineup and reduce costs.
The company's designers will work more closely with software developers, and hire new programmers and product managers, he said. That will help the company have more ``robust'' phones in 2009, he said.
Brown also said Motorola has started reducing costs by $500 million, without giving details on how many jobs will be cut. The reductions are on top of the 7,500 job cuts Zander started last year. The lower costs helped Motorola post its first profit in three quarters in October.
``They've done a lot of cost-cutting,'' Morgan Keegan & Co.'s Tavis McCourt said in an interview. ``The big challenge for Brown is to stabilize revenues and ultimately start growing them again.'' The Nashville, Tennessee-based analyst advises investors to hang on to the stock.
Source: Bloomberg
Motorola Predicts Unexpected Loss After Profit Slump
