NEW YORK-Happy days are here again for Motorola Inc., Schaumburg, Ill., which announced second-quarter earnings late July 13 of $273 million, or 44 cents per share.
The gains are three cents per share ahead of analysts’ consensus estimates of 41 cents and a quantum leap over the same period a year ago when the company posted earnings of $6 million, or one cent per share.
Further, possible restructuring plans for Iridium will not affect immediate results in the third quarter, Motorola noted.
“The improved results stem from good growth in semiconductors and very significant growth in digital wireless telephones, as well as a recovery in Asian markets and the benefits of the company’s profit improvement programs,” said Robert L. Growney, president and chief operating officer.
Led by Asian markets, including Japan, semiconductor sales increased in all regions except Europe, the company said.
Within its wireless end-user device business, called the Personal Communications Segment, Motorola said it had experienced the most rapid growth in Asia and Europe for Global System for Mobile communications products, in Asia and the Americas for Code Division Multiple Access products and in the Americas for integrated Digital Enhanced Network products.
Personal Communications experienced a 17-percent increase in sales to $2.8 billion and a 21-percent increase in orders to $3.2 billion. Operating profits totaled $125 million, compared with a $501 million loss reported during the year-ago quarter when Motorola took a large restructuring charge.
“Higher sales and gross margins more than offset an increased investment in advertising and engineering resources devoted to delivering new digital wireless phones,” the company said in its earnings release.
During a conference call to announce and discuss the results, Growney said Motorola will continue to add engineering, marketing and customer service staff.
Within its Personal Communications Segment, sales and orders of paging products declined “very significantly,” according to the manufacturer.
Although paging products are getting back to a level where they contribute to profits, Growney said the fact “paging continues to suffer” is one of the challenges Motorola must confront.
“We have been looking for a new type of proposition and are still hunting for that,” he said during the conference call.
Within its Network Systems Segment, Motorola said sales were flat at $1.6 billion and orders declined 7 percent to $1.6 billion. However, operating profits increased “several times” to $169 million as the result of a restructuring that the company accounted for last year.
“Excluding that charge, operating profits were lower than a year ago, primarily due to an increased investment in engineering resources working to develop digital solutions for network operators and to larger losses in the satellite communications business,” Motorola said.
The company said it took a special charge of $126 million during the second quarter to write down the value of Iridium L.L.C. bonds it owns “to a level which reflects the decline in the value of Iridium’s public high-yield debt.” Motorola warned it may have to take an additional special charge against earnings next quarter to reflect a restructuring of Iridium.
An out-of-court restructuring, an in-court Chapter 11 restructuring or a court-approved bankruptcy liquidation are three possible scenarios for Iridium, Growney said. He added that Motorola hopes liquidation can be avoided, but that Motorola’s balance sheet will remain strong should this happen, despite its substantial investment in Iridium. That is because Motorola will record gains from several previously announced asset sales during the third quarter. These include the sale of its North American antenna site business to Pinnacle Towers.
“Our participation in (an Iridium restructuring) depends on substantial participation of all the other significant parties-the bank syndicate, the high-yield bond holders and other equity investors,” Growney said.
“If there is substantial participation by all significant parties, we believe Iridium can reach an achievable business plan.”
In its Commercial, Government and Industrial Systems Segment, Motorola said sales declined 6 percent to $955 million, but orders rose by 11 percent to $1.2 billion.
Among new orders this unit received last quarter are contracts for automated fare collection solutions based on smart cards from Amtrak and the San Francisco Bay Area TransLink project, and from transit systems in Australia and Italy.
Motorola also recently introduced its new M-Smart Jupiter platform, which enables users to download securely multiple applications, including airplane ticket or boarding pass information, onto a single smart card.
