Motorola to keep set-top box and phone units together
Motorola Inc. said it plans to keep its mobile phone and set-top box unit together to develop more products that harness both technologies.
"That's absolutely the plan," said co-Chief Executive Officer Sanjay Jha, who oversees the two units that Motorola plans to spin off early next year. "I've been long enough in the game not to give you a definite forever and forever, but the rationale for the two businesses staying together is I really see that it's possible to create value between the two."
The Schaumburg-based company plans to introduce products starting next year that can deliver content from a digital set-top box to a smartphone, Jha said in an interview. Motorola last year explored the sale of the set-top box unit, three people familiar with the situation said at the time.
Jha spoke after Motorola reported second-quarter earnings that beat analysts' estimates, helped by demand for its new line of smartphones.
Profit, excluding some costs, was 9 cents a share, the company said in a statement. Analysts had projected 8 cents, the average estimate compiled by Bloomberg. Revenue in the quarter was $5.41 billion, compared with the $5.2 billion estimate.
Motorola's Droid X, the company's latest phone based on Google Inc.'s Android software, sold out at Verizon Wireless and Best Buy Co. stores after its debut this month. Such demand, following the success of the original Droid which debuted late last year, bodes well for a recovery at Motorola, which had a 27 percent sales drop in 2009, said Mark McKechnie, an analyst at Gleacher & Co. Securities.
Spinoff Coming"The Droid X appears to be off to a good start, fueling confidence in Motorola's handset turnaround," said McKechnie, who is based in San Francisco and has a "buy" rating on the stock.Revenue for the quarter fell 1.5 percent from a year earlier. Net income climbed to $162 million, or 7 cents a share, from $26 million, or 1 cent, a year earlier.Motorolo fell 7 cents to $7.61 at 4 p.m. on the New York Stock Exchange. The stock has dropped 1.9 percent this year.Jha reiterated today on a conference call that he's confident the unit will turn a profit in the fourth quarter. That would pave the way for the spinoff, which the company said it expects in the first quarter.The mobile-phone unit reported an operating loss, excluding income from a legal settlement, of $109 million, compared with an operating loss of $239 million in the year-earlier quarter. Revenue dropped 6 percent to $1.72 billion.Smartphone SurgeMotorola said it shipped 2.7 million smartphones last quarter and 8.3 million handsets in total. McKechnie had estimated 2.5 million smartphones and 8.3 million handsets.The Droid X is "off to a great start," Jha said. He expects the company to launch "meaningfully more" than 20 smartphones this year, after saying in the past the company would debut at least 20. Android will continue to be the main operating system for Motorola phones because of the fast pace of innovation around the software, Jha said in the interview.Demand for the Droid X is currently outstripping supply, he said. Jha, who joined Motorola in 2008 from chipmaker Qualcomm Inc., said today a shortage of mobile phone chips is "our largest constraint." He expects Motorola to ship 12 million to 14 million smartphones this year and said shipments would be a "modest" amount more than that if not for supply constraints.Financial OutlookMotorola agreed this month to sell its wireless networks unit to Nokia Siemens Networks for $1.2 billion, leaving co-CEO Greg Brown to manage just the enterprise mobility business that makes two-way radios and bar-code scanners.The enterprise mobility division had a revenue gain of 10 percent to $1.85 billion in the second quarter. Sales at the set-top-box unit fell 13 percent to $886 million, and sales at the wireless networks unit dropped 2 percent to $967 million.Motorola said profit for the third quarter, excluding certain items, will be 10 to 12 cents a share. That compares with the average estimate of 10 cents per share, according to Bloomberg's survey of analysts."The old Droid is still selling surprisingly well, the Droid X is doing well and it looks like the Droid 2 launch is early," said MKM Partners analyst Tero Kuittinen who is based in Greenwich, Connecticut and has a "neutral" rating on the stock. "This is kind of like Motorola's moment in the sun."