More bad news for Motorola?
Wall Street analysts are expecting more bad news from Motorola Inc. when it releases its second-quarter earnings on Thursday.
Not much has been heard from the Schaumburg company since early June when it chopped about 150 positions at Motorola Labs, its research-and-development arm and the future of its product portfolio.
In January, Motorola CEO Greg Brown continued to aggressively clean house and appointed new lieutenants while others resigned, including Richard Nottenburg, chief strategy and technology officer who jumped to the CEO seat at Sonus Networks Inc.
Since then, shares have plummeted to the historic low of $6.76 on July 15, compared to $17.86 just a year before. This past week, shares barely rose above the $7 range. A Motorola spokeswoman declined to comment, but more details could be provided Thursday when analysts push for shareholder value.
"There could be substantial investors who are nervous about the stock and are doing their homework," said Werner F.M. De Bondt, director of DePaul University's Richard H. Driehaus Center for Behavioral Finance. "I would take this as a bad sign."
In April, Motorola posted a first-quarter net loss of $194 million, compared to a net loss of $181 million in the year-ago period. Sales were $7.45 billion, compared to $9.43 billion in the same quarter last year. Its Mobile Devices business had a stunning 39 percent loss in sales.
Motorola since has remained mum on rumors about the next leader of the Mobile Devices business, which could spin off as a separate company next year. And Motorola has yet to demonstrate a clear turnaround strategy or demonstrate new products, especially handsets, that might help revitalize its sagging revenue, said Rick Franklin, telecom analyst for Edward Jones.
"Motorola's lack of leadership in its handset business does not bode well for a quick turnaround," said Franklin.
Besides internal woes, Motorola could be more vulnerable to the weak economy.
"The overall market has been weak and investors tend to seek safe-haven stocks in weak markets," said Franklin. "Motorola's recent poor performance is not attractive to investors in a market that is already weak and has been heading lower. High quality names that have performed well in recent months and quarters are trading much cheaper and these represent safer alternatives for many investors in the current volatile market."
David Weissman, senior telecom analyst with Zacks Investment Research. agreed and said Mobile Devices has lost significant market share "with devastating declines in volume sales and is unlikely to become profitable" before 2009.
"This segment also registered lingering erosion of profit margins and while Motorola has initiated some structural measures, these transformations have yet to materialize," Weissman said.
Besides weakness in the economy and its own market, stiff competition has been eroding Motorola's worldwide standing, said Weissman.
"Industry sources are indicating Motorola's fall from the No. 3 market share position for handsets as LG gathers handset sales momentum and as iPhone and BlackBerry's continued growth trend, along with Nokia's dominance outside the United States, are issues to consider as Motorola's selling volume apparently continues its decline."
But other bad news has permeated Wall Street in recent weeks about the bad housing market and bank solvency, which has dragged many industries down. So Motorola will be bucking against a growing wall of problems internally as well externally.
"There is often fear in the market and some will see ghosts everywhere," said De Bondt. "And rumor feeds on itself."