Motorola Inc. released its second-quarter earnings Thursday morning, and results were as dismal as the company and analysts had projected.
Motorola posted a loss of $28 million, or 1 cent per share, compared with net income of $1.38 million, or 55 cents per share, a year earlier. The second-quarter results included charges related to job cuts and an insurance litigation matter that totaled 4 cents per share.
Revenue fell 19 percent to $8.73 billion, down from $10.82 billion in the second quarter of 2006.
The worst numbers stemmed from continued troubles in the mobile devices business, executives said during an investor conference call. The Schaumburg, Ill., telecom corporation claimed 13.5 percent market share worldwide as sales in Africa, Asia, Europe and the Middle East fell below expectations. Revenue in that unit dropped to $4.3 billion. Still, the RAZR and KRAZR lines remained the company’s top sellers and Motorola saw growth in North America and Latin America.
With these stats in mind, Motorola earlier this week reshuffled its business units, just a few months after replacing executives in the mobile devices division, upon which Motorola heavily depends. Executives said on Tuesday – and reiterated on Thursday – the unit will not be profitable in 2007. However, President and COO Greg Brown said there should be improvement over the next six months.
“We had another challenging quarter,” he said. “We also know we have a lot to do. … But there was progress made.”
Brown said improvements came from momentum on WiMAX initiatives, more activity in the software and silicon sectors and by reducing channel inventory. Motorola has struggled to move devices through its channel partners and will focus on marketing strategies during the third quarter, executives said. Confidence among distribution partners does seem higher “than a quarter or two ago,” Brown noted.
Another bright spot came from the Connected Home division as companies including AT&T Inc. and Verizon Communications Inc. maintained demand for high-end DVR and IPTV products, Brown said. Revenue from home networks and enterprise rose 9 percent to $2.6 billion.
Meanwhile, sales from the enterprise mobility arm increased by 42 percent to $1.9 billion, thanks to a recent acquisition.
Despite that good news, Motorola is very cost-conscious. It has cut jobs to lower expenses; so far, it has laid off 7,500 employees. It has seen the payoff from 4,100 of those cuts, said CFO Tom Meredith, and more reductions could be ahead.
“This is an ongoing process,” he said.
Motorola has acquired several companies this year, but executives didn’t attribute those expenses to the company’s losses. Instead, Ed Zander, chairman and CEO, praised those deals for strengthening Motorola’s standing in the video sector. He added the company could buy more small IP and tech firms but didn’t commit to specifics.
Notably, during Thursday’s call, no one asked Zander about reports investors are seeking his ouster and what such a shakeup would mean for Motorola. Rather, analysts lobbed softball questions about devices and margins.
Motorola’s stock was up 1.11 percent at mid-morning on Thursday, reaching $18.20.
Motorola Inc. www.motorola.com
