Motorola reaches out, reassures investors

Motorola Inc. backed its forecast for fourth-quarter earnings and revenue growth Thursday, sending its shares up 3.6 percent.

The news was a relief for investors who had worried last week's announcement on the departure of Chief Executive Ed Zander was a sign Schaumburg-based Motorola would miss its targets.

"What we failed to take into account, frankly, is that you would have great angst over the fact we made that announcement and didn't confirm" fourth-quarter guidance at the same time, Chief Financial Officer Tom Meredith told a Lehman Brothers investor conference.

He backed Motorola's forecast for earnings from continuing operations of 12 cents to 14 cents per share and said its mobile device unit would see sequential revenue and bottom-line improvements.

Motorola has been losing mobile phone market share to rivals such as Nokia Oyj and Samsung Electronics Co. Ltd.

"It was very helpful for the company to make this statement today," said Oppenheimer analyst Lawrence Harris, describing Motorola's share rise as a relief rally.

Asked about a recent call by activist investor Carl Icahn for Motorola to break into several units, Meredith would not rule out structural changes.

"I believe there's every opportunity for us to create significant economic value as a whole. Does that mean other options aren't viable? Not at all. A change in circumstance sometimes requires a change in action," he said.

Meredith said Motorola, which shifted its focus earlier this year to profit growth from market share growth at all costs, was changing tack again by making a push into the market for lower priced phones.

"There is a shift. We focus on margins obviously. Now we're focused on the balance between that and market share, that includes going after low-tier," he said.

Meredith acknowledged the change in strategy would hurt average selling prices, but said it would help stop Motorola's competitors from taking market share. Motorola had eased off competing on phone prices in some emerging markets, where larger rival Nokia has managed to gain market share.

Meredith declined to say when the unit would turn a profit but promised Motorola would see significant improvement in competitiveness in the second half of 2008.