CORRECT: Motorola 1Q Loss Widens, But Company Cuts Costs
April 30 2009 - 5:33PM
Dow Jones News
Aggressive cost cuts helped Motorola Inc. (MOT) blunt a widening
first-quarter loss on plunging revenue, but the company remained
silent on the new line of cellphones intended to spark its
turnaround.
The Schaumburg, Ill., company is banking on several phones
powered by Google Inc.'s (GOOG) Android mobile operating system.
The devices, however, aren't expected until the end of the year,
forcing Motorola to cut jobs, scrap several promising products, and
suspend its dividend to shore up its balance sheet.
As a result, Motorola said it is ahead of schedule in its cost
cuts and raised its full-year cost-savings target by $200 million
to $1.7 billion. Its second-quarter loss estimate was narrower than
expected.
Motorola posted a first-quarter net loss of $228 million, or 10
cents a share, compared with a loss of $190 million, or 9 cents a
share, a year ago when there were fewer shares. Results included a
net charge of 5 cents a share related to cost cuts. Analysts, on
average, forecast a loss of 11 cents a share.
"At first glance it appears Motorola's first-quarter results
exceeded expectations, though the handset unit profitability
worsened," said JMP Securities analyst Samuel Wilson.
Net sales retreated 28% to $5.37 billion, well below what Wall
Street expected.
Interest is being piqued on what Motorola has in store for the
latter half of the year, but its bid to create an eye-catching
device will face competition from the next Apple Inc. (AAPL) iPhone
and the Palm Inc. (PALM) Pre. A Strategy Analytics report called
for the global handset market to fall 10% in the second quarter,
although smartphones are expected to fare better.
Co-Chief Executive Sanjay Jha, however, spurned requests by
analysts to provide more detail, staying vague with promises of
differentiation and social networking features. He added the
devices would address the mid-to-high-tier market and launch with
multiple carriers in multiple regions.
"It's a tough thing to be able to answer without tipping my hand
too much on these things," he told analysts during a Thursday
conference call.
Motorola plans to launch the phones ahead of the holiday
shopping season. Jha told Dow Jones Newswires that he preferred to
unveil the devices closer to their launch date, marking a departure
from the typical early sneak peek of other high-profile smartphones
provided by rivals.
Motorola shares recently fell 7.4% to $5.52.
Motorola shipped 14.7 million handset units in the first
quarter, down 23% from the fourth quarter, as it continues to fall
from its perch as a top-tier player. Its market share fell to 6%,
roughly half of what it held a year ago.
The mobile-devices division posted a wider loss as sales dropped
45%.
Motorola delayed plans to spin the unit off because it can't
survive on its own until it stops hemorrhaging cash. Jha said the
company still intends to go through with the split, although didn't
discuss a timeframe.
What would be the other half fared better but also saw pressure
from the weakening economy. The home-networks segment saw sales
fall 16% and earnings drop by a quarter. The company is also
reducing its resources in WiMax, although Co-CEO Greg Brown said
that demand remains in the U.S. with Clearwire Corp. (CLWR) still
committed to the network.
The enterprise business, meanwhile, posted an 11% decline in
revenue amid a 38% fall in earnings. Brown said he was optimistic
over demand from public safety customers and the potential windfall
from the economic stimulus package.
Brown said he expects higher sequential sales from each
division, although both would still post year-over-year
declines.
The company projected a second-quarter loss of 3 cents to 5
cents a share. Analysts expected a loss of 5 cents.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020;
roger.cheng@dowjones.com
(Kerry Grace contributed to this story.)