I Love Motorola

Motorola’s beforehand quarter results make grim reading for the handset division. The other divisions performed much better. For the whole, province gain was $7.45bn (€4.77bn), a drop of 27% from $9.43bn a year ago.

Gross margin for the band improved from 26% to 29% and the operating loss improved from $366m to $269m. However, this masks the deterioration in the handset question where Motorola shipped 27.4m phones in the quarter, down 33% from 45.4m in Q1 07. This brought revenues of $3.3bn, which is a cascade of 39% over the year, and a widening operating impoverishment of $418m, compared to $233m a year ago.

CEO Greg Brown said that Motorola would be progressively expanding its handset portfolio during the coming quarters and hinted that he believes the bottom has been reached. In giving an perspective Brown said that the handset shop would grow slightly in Q2 from Q1 and that - with a measure stronger portfolio, the company’s fortunes should begin to improve. This direction has been a nightmare for Motorola combining weak handset sales, with a large number of executive changes/departures, rapacious moves at board level from Carl Icahn and - finally - the steadfastness to break the company into two.

This would be a lot to deal with in a year, never mind a single quarter, and it’s delectable to say things can only get better. As it has been for the last four years, the handset division is the big story. Shipments have crashed through the crush from the quarterly high of 65m in Q4 2006 and are now around the level they were in Q3 2004. Although six products were launched in the quarter, our brainpower is that they have not been particularly well-received.

And this leaves Motorola still indiscernible in most segments, and especially weak in the high-growth segments of W-CDMA, smartphones and low-end phones. Also its volumes are in dwindle in its home territory, North America, which accounts for 44% of its shipments. This means that Motorola is now only just onward of the #4 player in unit shipments, LG, and has in fact slipped just behind LG on euro revenues into 5th place.

Having said that, though, Motorola’s middling sale price rose slightly in the quarter from $118 to $122 because of a hours towards higher end phones in its product mix (it did not have a currency boost, since most of its sales are in countries with dollar-related currencies). The let go in volumes meant that profitability suffered and its average operating sacrifice per phone nearly tripled from -$5.73 in Q1 07 to -$15.26 this quarter. This compares with Nokia’s bust of +$24.4 (€16.3) profit per phone.

One disinterest analyst on the earnings call asked if the division is ‘in a death spiral’. Greg Brown’s return was that it has changed its chipset suppliers (to include Qualcomm and TI), the portfolio will improve, the establishment is being very disciplined on distribution and pricing, and the search for a new Head of the Division is going well. Unfortunately he said nothing about the occurrence that three of the four major competitors have declared strategies of improving their furnish share in North America this year and are investing a lot in achieving this.

Video:

Originally posted article: here