Motorola still digging out, forecasts continued losses: Analysts expect troubles to boost Nokia

Motorola Inc. remains in the doldrums as its handset division — formerly the engine of the company’s revenue and earnings — posted a huge loss in the fourth quarter of 2007. The company forecast more pain for the ongoing first quarter.
Motorola’s recovery in the handset business, recently pegged at 2008, will take until 2009, company executives said this morning.
The American handset maker’s global market share has plummeted to about 12% — about half its position before its year-long decline — which still entitles it to the No. 3 position among the world’s top-tier handset makers, according to preliminary data from Strategy Analytics. The beleaguered company shipped nearly 41 million handsets in the fourth quarter, behind Samsung Electronics Co. Ltd. and Nokia Corp.’s forecasted results.
Investors sent Motorola’s stock down more than 22% by mid-morning, prompting pundits to predict that “value investors” — presumably those with patience — would move in on the battered stock.
Nokia continues upswing
One-time rival Nokia Corp. — which reports earnings tomorrow — may benefit, according to analyst Maynard Um at UBS. Nokia is expected to report device shipments of 130 million units for the fourth quarter, giving it 39% global market share or better, figures three times Motorola’s. Nokia has reiterated its interest in the United States market, where Motorola has comfortably led, but is now slipping.
Moto’s fourth-quarter revenue dropped to $9.6 billion and earnings plummeted to $100 million, down from $11.8 billion and $623 million, respectively, in the year-ago quarter.
In the crucial mobile handset business, Motorola’s fourth-quarter revenue was $4.8 billion, down 38% from the year-ago quarter, and the division posted an operating loss of $388 million, down from earnings of $341 million a year ago.
In full-year results, revenue for 2007 dropped to $36.6 billion from the prior year’s $42.8 billion and the company lost $49 million, down from the $3.6 billion it earned in 2006.
“Patience” has been Motorola’s watchword for the past several quarters and its executives said that turning around its handset division, which accounted for half the fourth quarter’s revenue, would take longer than the company had forecast in past quarterly reports.
“The recovery in mobile devices will take longer than expected,” said new CEO Greg Brown. “Our primary focus is on improving profitability and enhancing our product portfolio.”
Zander’s collapse
Brown took over Jan. 1 from former CEO and current board chairman Ed Zander, who led the company as it rode its Razr handset’s phenomenal sales performance. Zander’s tenure soured, however, as the company failed to follow-up its Razr design with another compelling platform and it over-shot in efforts to challenge Nokia’s supremacy on a global basis. Revenue, earnings, margins and market share collapsed as a result.
Brown cited the “strong performance” in the company’s home and networks mobility and enterprise mobility businesses. The home and networks mobility business posted $2.7 billion in revenue in the fourth quarter, up 11% over the year-ago quarter, while earnings decreased to $192 million from $223 million in the year-ago quarter. Full-year revenue reached $10 billion, up 9% over the prior year, though earnings decreased to $709 million, compared with $787 million in 2006. Enterprise mobility revenue in the fourth quarter reached $2.1 billion, up 35% over the year-ago quarter, which Motorola attributed to its purchase of Symbol Technologies early last year. Earnings reached $451 million, up from $323 million. Full-year revenue jumped to $7.7 billion, up 43% from the prior year, while earnings reached $1.2 billion, up from $958 million in 2006.
But handsets drive the business at Motorola. And analyst Mark McKechnie at American Technology Research said that the company’s announcement of a W-CDMA chipset deal with Qualcomm Inc. boded well for its lack of 3G phones. Meanwhile, however, Motorola’s battered stock price — “a discount to historic trough levels,” McKechnie wrote in a note to investors — might represent a value.
“Should street numbers and expectations come down sufficiently, we would suggest value investors begin taking a look here,” the analyst wrote.