Motorola Profit Up 34 Pct. on New Phones

Motorola Profit Up 34 Pct. on New Phones

Jan 19, 2005
Author: Max Kneeland

Motorola Inc. rode strong sales of its 20 new cell phones to a 34 percent increase in fourth-quarter profits, capping a resurgent year under new CEO Ed Zander.

Both earnings and sales reported Tuesday by the world's second-largest handset maker behind Nokia handily outpaced Wall Street's expectations.

Net earnings for the last three months of 2004 were $654 million, or 27 cents per share, compared with $489 million, or 20 cents per share, a year earlier.


Excluding results from discontinued operations — the money-losing chip business it spun off into Freescale Semiconductor Inc. last month — earnings were 28 cents per share. That was 4 cents better than the consensus estimate of analysts surveyed by Thomson First Call.


Revenues rose 27 percent to $8.84 billion, easily topping the $8.46 billion predicted by analysts. A year earlier, revenues were $6.94 billion.


Zander cited an "enthusiastic" reception to the new portfolio of products launched by the Schaumburg, Ill.-based company — particularly its much-advertised, ultra-thin Razr handset, which he said "greatly exceeded sales expectations."


He said Motorola picked up about three percentage points of market share in the quarter, solidifying its No. 2 position behind Nokia and giving it a five-point lead over No. 3 Samsung Electronics Co. Ltd.


Analysts have said that both Motorola and Nokia appear to have gained at the expense of No. 3 Samsung, where profits fell 2 percent in the fourth quarter as it was slow to get new handsets to market.


The cell-phone unit, by far Motorola's biggest business, posted operating earnings of $526 million on sales of $4.9 billion — up an impressive 51 percent from a year earlier. The company said it shipped 31.8 million handsets in the fourth quarter — up 42 percent.


"Who would have thought a year ago that we'd have some of the hottest products — about the hottest products," Zander told analysts on a conference call. "It's been awhile, but there's even more."


Motorola forecast first-quarter sales of $7.5 billion to $7.9 billion, up from $7.4 billion a year ago and in line with analysts' estimate of $7.58 billion. It estimated earnings in the range of 17 cents to 20 cents per share; analysts have been expecting 20 cents.


Among other divisions, Motorola's wireless networking unit doubled its operating profit to $281 million on sales of $1.4 billion, up 2 percent. Its electronic systems segment had a 5 percent sales increase to $704 million but a 36 percent drop in earnings as a result of higher research and development and other costs. Broadband earnings swung to $47 million from a year-earlier loss on sales of $691 million, up 25 percent.


Analyst Ren Zamora of Loop Capital Markets in Chicago said it was a strong showing by the handset business, singling out the high number of unit shipments in particular as "a pleasant surprise."


"Now it's just can they continue that momentum going forward, trying to remain ahead of that competition," he said. "Everyone else is also trying to get out new things. Samsung is not going to rest on their laurels."


For the full year, Motorola had a net profit of $1.54 billion, or 64 cents a share, up 72 percent from $893 million, or 38 cents a share, a year earlier. Revenues climbed 35 percent to $31.3 billion from $23.2 billion.


Motorola shares were down 3.3 percent in after-hours trading after closing up 40 cents, or 2.3 percent, at $17.43 on the New York Stock Exchange in anticipation of superior results. The stock is slightly above the midpoint of its 52-week trading range.



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