Worst over for Motorola? Executives, analysts think so
Schaumburg-based Motorola Inc.'s co-CEOs said Thursday that the worst could be over as the communications company posted a modest second-quarter profit, gears up for more new phones and considers much of its cost-cutting to be over.
The vast majority of Motorola's cost reductions have been completed, co-CEO Greg Brown said during an interview Thursday.
"We can't cut our way to prosperity, and now we're focused on growth," Brown said.
That could mean a sigh of relief for campuses in Schaumburg, Arlington Heights, Libertyville and elsewhere. They could, at least temporarily, bask in the glow of $26 million in profit, or 1 cent per share, compared to $4 million, or break-even share, a year ago. Sales were $5.5 billion, down from $8.1 billion, or 32 percent, from a year ago.
After seeing the modest profit, some analysts were ready to break out the champagne, and the positive feelings drove shares more than 9 percent higher. Although the profit was a pleasant surprise, it wasn't huge, and it was mostly on cost cuts and about 8,000 layoffs, said Edward Snyder, telecom analyst with Charter Equity Research.
"The street is pushing the stock up because it looks like they've bottomed in phones and are on a very slight upswing," said Snyder. "Phones did slightly better than expected. So if you're talking about the upside this quarter, other divisions contributed but so did Mobile Devices."
And, never say never. Even the company acknowledged it must be prepared for trouble. If the economy takes another downturn, Motorola could return to more cuts, said co-CEO Sanjay Jha.
"If things don't measure up, we'll have to do what we feel is good for the company, the stability of Motorola, the balance sheet and its collective future," said Jha.
The phone business saw its sales dive 45 percent. The other businesses also squeaked by. Despite this, Brown and Jha said they're happy about some new products and deals that could boost the company further later this year. They touted the more powerful Apx 7000 new portable radio for police, fire and military use, as well as the chance to roll out a 4G wireless phone network for a Japanese company.
Then there are the new Google Inc. Android wireless handsets expected later this year. Motorola is taking the much-talked-about platform and hoping to introduce some of those phones later this year. The new line also has generated enough excitement to attract developers to Motorola's door, all aiming to create more applications.
"We invited about 220 developers and about 200 showed up," Jha said about a meeting he held recently in San Francisco. Another such meeting will be held soon in Chicago.
Some Wall Street analysts said they've seen photos of the new Motorola Android phones and liked them, although they haven't tried them yet. Some speculate the phones could be available to consumers through Verizon Wireless, AT&T or T-Mobile.
"I saw the plans and they could be a hit," Mark McKechnie, telecom analyst with American Technology Research, said about the Android phones. "Motorola has pulled themselves out of some tough spots in the past. And this could help now. Just like the StarTac and Razr did a few years ago."