SCHAUMBURG, Ill.—After eye-opening, second-quarter results that seemed to tilt the handset game table in its favor, Motorola Inc. announced third-quarter revenue and earnings that fell short of guidance and analysts’ expectations—despite otherwise strong fundamentals and record handset shipments.
The news took Motorola’s stock down more than 5 percent in trading. Financial analysts, however, noted that the company’s earnings per share, at 34 cents, met Wall Street expectations.
Motorola’s revenue for the third quarter reached $10.6 billion, up 17 percent from $9 billion in the year-ago quarter and a self-proclaimed record for the third quarter. But that was below management’s previous guidance of $10.9 billion to $11.1 billion, made in the giddy days of July. Net income was about $968 million, down from $1.75 billion in the year-ago quarter, a 45-percent drop.
Handset shipments reached 53.7 million units, up 39 percent over the year-ago quarter, but below Motorola’s goal of hitting 55 million units. The results gave Motorola a self-proclaimed global market share of 22.4 percent, up 3.8 percent from the year-ago quarter but a negligible gain over the previous quarter.
The company’s chief executive officer, Ed Zander, delivered the news in a matter-of-fact tone that contrasted markedly with the exuberance that accompanied July’s second-quarter earnings report. He said he was “not pleased” with the revenue results. His outlook for the fourth quarter’s revenue, from $11.8 billion to $12.1 billion, would represent an 18-percent to 21-percent increase over the year-ago quarter, he said.
Motorola’s fortunes rise and fall on its handset business, which comprises a majority of revenue and profit among the company’s three major divisions, which include networks and enterprise and connected home solutions. Mobile devices contributed $7 billion to the company’s third-quarter revenue, up 26 percent compared with the year-ago quarter. Networks and enterprise sales were nearly $2.8 billion, consistent with year-ago revenue. Connected home solutions contributed $812 million to overall revenue, a 9-percent increase over the year-ago quarter.
Zander attributed his company’s lower-than-anticipated revenue figure on disappointing sales of iDEN handsets at Sprint Nextel Corp., in anticipation of shipments of new dual-mode devices in the fourth quarter, and on lower-than-projected infrastructure sales in Europe, the Middle East and Africa.
In the handset business, the third quarter is notoriously weak and Motorola’s preparations for the seasonally strong fourth quarter appear able to propel the company’s continued momentum, according to several analysts.
Whether Motorola’s third-quarter results and tempered outlook for the fourth quarter is reflective of its own operations or the handset market in general may become clearer tomorrow when Nokia Corp., the current market share leader in handsets, reports its quarterly results. Various indicators reflect that Nokia has been challenged in Europe by other vendors, including Sony Ericsson Mobile Communications L.P. and Samsung Electronics Co. Ltd., and in India’s emerging market by Motorola.
