Mobile phone business hangs up Motorola profits
Schaumburg-based Motorola Inc. Thursday posted a deeper loss in its first quarter, led by its floundering phone business that sold a little more than half as many units.
The Mobile Devices business, which is expected to spin off into a separate company next year, lost 39 percent in sales compared to a year ago and could force Motorola to trail even further behind global competitors.
"They will lose more money and probably have to just close or give the business away," said Ed Snyder, analyst with Charter Equity Research. "They can't spin it out. It's losing $1.5 billion a year."
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Despite those bleak numbers -- which are expected to worsen next quarter --Motorola Chief Executive Officer Greg Brown wasn't discouraged.
"We'll enhance and build out new products for Mobile Devices, and that will allow us to compete more vigorously in different categories, and it gives us the opportunity we need to move ahead," Brown said during an interview.
Brown said the company's handset headquarters will remain in Libertyville and no further job cuts are planned beyond the 2,600 already in motion.
On Thursday, Motorola posted a net loss of $194 million, or 9 cents per share, compared to a net loss of $181 million, or 8 cents, in the year-ago period. Sales were $7.45 billion, compared to $9.43 billion in the same period a year ago.
The Mobile Devices unit had sales of $3.3 billion -- down 39 percent -- compared to the year-ago quarter. Home and Networks were up 2 percent and Enterprise Mobility was up 5 percent. The handset business dragged down the company's number, to end in the overall loss.
"The value of its mobile handset business as a separate entity, should Motorola decide to divest the unit, is expected to be (less), with only 9.5 percent worldwide market share as compared to over 17.5 percent last year," said David Weissman, senior telecom analyst with Zacks Investment Research.
The handset business shipped 27.4 million units, compared to about 45.4 million a year ago. The latest offerings included different versions of the same lines: Rokr with capacity for up to 5,000 songs, the Z9 with satellite navigation, the less expensive W-series, the Moto Q9c smartphone, and more colors for the fading Razr.
The sales numbers represented the fewest handsets sold by Motorola since 2004, said Rick Franklin, telecom analyst with Edward Jones.
"It will take new handset designs to jump start unit sales growth," Franklin said. "It remains unknown if Motorola will have the design and functionality desired in a post-iPhone world."
The phone units were down because they still do not have a new platform and instead sold different versions of the same phones, said Snyder.
"Consumers and carriers have already voted and they don't like those phones, so doing more of the same doesn't help," Snyder said.