Moto’s Q2 warning: Dismal sales, earnings and unit volumes: Supply chain chief to head mobile devices

Motorola Inc. warned investors that its sales, earnings and unit shipments would all fall below previous guidance. The company also announced that Stu Reed, current head of the vendor’s supply chain operations, would take the reins of Motorola’s mobile device business.
The company also postponed for two months its annual meeting for financial analysts, in which it typically updates its strategy and progress in attaining its goals.
The news may well bring renewed attention to CEO Ed Zander’s stewardship of the company-and his continued tenure-which has been an issue since this spring when activist investor Carl Icahn made a failed attempt to gain a seat on Motorola’s board of directors.
The company said today that it expects next week to post second-quarter results of $8.6 billion to $8.7 billion in revenue, well below previous guidance of sales of $9.4 billion. The American handset vendor projected a loss per share of 2 cents to 4 cents per share.
Motorola attributed the shortfall to lower-than-expected handset shipments in Europe and Asia.
Device shipments for the second quarter will probably total 35 million to 36 million, the company said, slightly more than half of its fourth-quarter volume. The mobile devices business will not, as the company previously predicted, post a profit by the end of the year, according to Motorola. Such an admission may underscore analysts’ impressions that Motorola has consistently downplayed its eroding fortunes since late last year.
Motorola’s stock dropped around 2% in after-hours trading following the announcement.
Today’s guidance on second-quarter numbers suggests that Motorola’s closest competitor, Samsung Electronics Co. Ltd., is indeed about to pull neck-and-neck with the American vendor for second place in global competition. Analysts have said that Motorola’s share losses over the past two quarters likely will benefit Nokia Corp., Samsung and Sony Ericsson Mobile Communication.
Samsung is set to release its second-quarter earnings on Thursday. Nokia will report on July 19, the same day that Motorola provides its official results for the second quarter.
Motorola said that second-quarter results in its Connected Home Solutions and Networks & Enterprise divisions would meet the company’s expectations. However, the attention of investors and the industry is focused on the vendor’s mobile devices unit, which has come to provide Motorola with well more than half its revenue and earnings.
Reed, the new mobile devices chief, takes over the division after two years running the company’s supply chain operations. The appointment may signal that the company is placing an emphasis on pragmatic, operational aspects of the business in order to reverse its horrific slide in fortunes.
One year ago this month, at its annual financial analysts’ meeting, Motorola executives were riding high on a succession of seemingly robust quarterly results and Zander emphasized the company’s efforts to sell unprecedented volumes of handsets developed from its Razr platform. Now though, it seems that headlong push for volume shipments and market share, coupled with discounted prices on its best-selling Razr handset and failure to design credible Razr follow-up products, has led to the company’s current sag in fortunes.