Motorola Inc. had its share of ups and downs last week, when news of solid earnings and the launch of three new handsets collided with a software glitch in several of its Nextel Communications Inc. A-GPS-enabled phones.
The company’s second-quarter earnings reflected strong year-over-year growth with the exception of a hefty net loss due to the spinoff of its semiconductor business.
Sales of $8.7 billion for the second quarter were up 41 percent from $6.2 billion in sales for the year-ago period. Meanwhile, Motorola recorded a loss of $203 million, or 9 cents per share, including an expense of $898 million, or 38 cents per share, related to the initial public offering of Freescale Semiconductor Inc. Pre-tax earnings totaled $800 million and net earnings were $119 million, or 5 cents per share, for the quarter.
For the personal communications segment, sales hit $3.9 billion, up 67 percent compared with last year’s second quarter, and operating earnings stood at $394 million, also up from last year’s $91 million. Motorola pointed to the success of new products for both increases. The company said it shipped 24.1 million handsets, more than double the units shipped for the year-ago period. Included were 17 new handsets-15 with color displays and seven with integrated cameras.
Motorola expects overall sales to be between $8.4 billion and $8.8 billion for the third quarter with earnings between 15 cents and 19 cents per share.
Along with its earnings, Motorola announced Tom Lynch, executive vice president and president of the personal communications sector, will leave the company at the end of the summer, citing personal reasons. The company said it will announce a successor in the future.
New devices
For handset launches, the company released the Motorola A845 for use on AT&T Wireless Services Inc.’s newly announced third-generation UMTS network.
The device features integrated Bluetooth technology, an MP3 player and 64 MB of memory. It is GSM compatible for users roaming outside the UMTS network. Paired with the advanced network, video streaming, video capture and playback, MP3 downloading and multimedia messaging also should be possible at average data speeds between 220 kilobits per second and 320 kbps.
The handset will retail for $300 in Detroit, Phoenix, San Francisco and Seattle, where the network initially will be deployed.
Motorola also said the V710 1.23-megapixel camera phone is now shipping and will be available nationwide through Verizon Wireless next month.
The phone is notable for several reasons. First, it is Motorola’s first camera phone for Verizon, an offering that has been delayed since before the holiday shopping season. It is also only the second megapixel device to become available in the United States, following the launch of the 1.3-megapixel Sprint PCS Vision Picture Phone PM-8920 earlier this month. In addition, it is one of the first North American Bluetooth devices for CDMA networks.
In addition to Bluetooth connectivity, the CDMA phone has multimedia features, and voice and speaker functionality. With the device, users can capture, send and print high-resolution photos and video to be featured on the phone’s 2.2-inch color display. The phone is expected to cost $250 after a $70 rebate to customers who sign a two-year service plan. It will be available in Verizon Wireless stores.
Finally, Motorola said it will debut its V810 phone in North America with U.S. Cellular this September.
The phone includes an integrated camera with a built-in picture indicator light, advanced multimedia messaging service and BREW technology for fast access to U.S. Cellular’s Easyedge CDMA 1x wireless data service. The phone also features photo ID, a polyphonic speaker and an always-on Web browser. The device will cost between $150 and $200 with a two-year contract.
A-GPS glitch
Motorola’s good news was tempered by a software issue affecting assisted global positioning satellite location services for some of its phones sold by Nextel.
The glitch forced Nextel to temporarily disable the transmission of A-GPS-enabled location information for E911 Phase II location services for the handsets. Nextel said its Phase I 911 service, which transmits a caller’s callback number and the nearest cell site to a public-safety answering point, is still available.
The software glitch affected Motorola’s i205, i305, i710, i730, i736 and i830 iDEN phones. Motorola and SiRF Technology Holdings Inc. determined the software issue was in the interface between the SiRFLoc Multimode A-GPS software module incorporated in the affected Motorola handsets. The companies said they have identified a solution and are testing it for deployment.
Meanwhile, A-GPS commercial location services capabilities, typically used for locating fleets of vehicles or to download real-time weather information, were fully functional on the Motorola i58 and i88 iDEN devices, Motorola said. Applications including cellular calling capabilities, Direct Connect, text messaging, short message service, voice mail and caller ID were still in use on the affected phones.
Nextel said it will continue selling its current line of Motorola iDEN phones, implementing updates as necessary.
All in all, investors were not happy. After springing to $17.03 per share following the earnings news Tuesday, Motorola dropped 7.58 percent to trade at $14.87 per share after market close on Wednesday when the glitch was announced and then rebounded to $15.74 by Thursday afternoon.
LG weighs in
Meanwhile, LG Electronics Inc. said it hit record sales in the second quarter, recording $5.2 million in total sales, a 25.2-percent increase from last year’s second quarter. Within that, exports were up 31 percent from last year, with the United States accounting for $4 million in sales vs. $2.9 million last year.
Still, it appears the second quarter was relatively flat compared with the first quarter of 2004. LG’s sales were up just 0.5 percent from last quarter, and exports were down 1.5 percent.
However, handsets alone, which make up 31.9 percent of LG’s business, showed double-digit growth year over year and quarter over quarter. Sales of handsets stood at $1.66 million, up nearly 87 percent from a year ago and 22 percent from last quarter’s results. LG cited steady CDMA growth and robust expansion of GSM sales for the rise.
LG said its unit shipments grew 89 percent from last year to 9.94 million. Domestic CDMA unit sales decreased 23 percent from last quarter due to slower demand caused by mobile number portability, but grew 34 percent from last year. In addition, CDMA unit sales grew 49 percent from last year in the overseas market. GSM unit growth was 262 percent above last year due to sales expansion in North America and the introduction of W-CDMA handsets.
The results showed another close quarter between LG and competitor Sony Ericsson Mobile Communications L.P., which recently said it shipped 10.4 million units in the quarter-up 55-percent from the same quarter last year.
LG predicts it will ship 11 million units in the third quarter with domestic shipments of CDMA handsets expected to be similar to the second quarter and continuing strong growth in the U.S. market. The handset maker also expects GSM growth to continue and plans to launch a new GSM phone in the second half of the year.
Overall, LG recorded net profit of $426.6 million for the second quarter, down from $505 million last quarter, but much improved from $230.6 million garnered in the year-ago period.
