Motorola Mobility Holdings Inc. (MMI) reported a 28% rise in
second-quarter revenue, thanks to strong tablet sales, but the
device maker provided weak guidance for the current quarter because
of delays in launching speedier 4G devices.
Motorola's attempt to revive its fortunes through an aggressive
embrace of mobile devices running on Google Inc.'s (GOOG) Android
operating system hasn't been flawless. The Libertyville, Ill.,
company turned out some of the first real competitors to the Apple
Inc. (AAPL) iPhone and iPad, but it since has been plagued by tepid
reviews for its products and delays for devices that run on faster
4G networks.
In addition, activist investor Carl Icahn--long a thorn in
Motorola's side--has started agitating for the company to explore a
sale of its patent portfolio, a move he argues could raise billions
of dollars but which some analysts say could hobble a company that
relies on intellectual property to compete.
"I think the call from Ichan, in common with all shareholders,
is to optimize and enhance shareholder value," Chief Executive
Sanjay Jha said in an interview, skirting the issue. "We're very
focused on doing exactly that, making sure our share price is a
true reflection of the value of our assets. We have a number of
options that the board, myself and the management team regulary
evaluate."
Jha added that Motorola has "very strong" patents, which have
been rising in value because of the convergence of mobility, media
and consumer products.
As for the projected softness in the current period, Jha blamed
the "modest delay" for its 4G devices, including its Bionic
smartphone. He also said profitability in the tablet business
shrunk more quickly than Motorola anticipated and that the company
is seeing "sequential and seasonal" effects in its home
business.
"The guidance for the third quarter is weak, but for the fourth
quarter, when you back into numbers, you would see the guidance is
robust," he said, noting the expected launches of multiple 4G
devices.
Jha declined to provide further details about the devices but
said the company will have at least five 4G LTE devices in the
market by year's end, including two new tablets. The devices were
delayed as Motorola worked to develop its own 4G chips, rather than
use wireless processors from other companies.
"Using our own chipsets has tradeoffs," Jha said. "This has had
an impact on third-quarter earnings but allows us to generate a lot
more [intellectual property]. 4G IP will be quite important."
Earlier this year, Motorola delayed its first 4G smartphone, the
Droid Bionic, a hiccup for both it and Verizon Wireless, the
company's largest and most important carrier partner. It also
pushed back the release date for 4G capabilities for its Xoom
tablet. Both devices will be available in September, Jha said.
For the third quarter, Motorola projects per-share earnings
between break-even and 10 cents, below the 24 cents expected by
analysts polled by Thomson Reuters. For the year, the company sees
per-share earnings of 48 cents to 60 cents, below the analyst
estimate of 71 cents.
Chief Financial Officer Marc Rothman said during a conference
call with analysts that third-quarter sales should be up "slightly"
from the second quarter.
Motorola shares, down 21% in the year to date through Thursday's
close, fell 3.9% to $22.01 in after-hours trading.
In the second quarter, Motorola Mobility had a loss of $56
million, or 19 cents a share, compared with a prior-year profit of
$80 million. Excluding stock-based compensation, write-downs and
legal claims, per-share earnings were 9 cents, above the 6 cents
expected on average by analysts.
Revenue rose to $3.3 billion, surpassing Wall Street's
projections for $3.12 billion.
The company shipped a total of 11 million mobile devices during
the second quarter.
Third-quarter smartphone shipments should rise from the 4.4
million reported in the second quarter, Jha said. Tablets sales,
meanwhile, should fall from the better-than-expected second-quarter
figure of 440,000, he said, as customers wait for new 4G tablets to
be launched in the fourth quarter.
Rothman said Motorola expects smartphone and tablet shipments
for the year to total 21 million to 23 million, compared with its
previous projection for 20 million to 23 million. However, Motorola
expects to ship only 1.3 million to 1.5 million tablets in 2011,
down from its prior view for 1.5 million to 2 million.
Motorola's Xoom, while highly regarded as the first to run on an
updated version of Android designed for tablets, was criticized for
its price tag, which was slightly more than the Apple iPad 2. Jha
said during a conference call Thursday that the company designed
its new tablets with "the more aggressive cost point in mind."
"One of the advantages of being first is that you get the halo
effect of being first, but you also have less time to cost
optimize," he said. He added that Motorola has "made dramatic
improvements" in its ability to deliver products faster, noting the
long process for the Bionic was a disappointing exception.
Motorola Mobility was created after it split with Motorola
Solutions Inc. (MSI) at the beginning of this year. Motorola
Solutions, which makes public-safety radios and handheld scanners,
earlier reported its second-quarter profit more than doubled on
strong demand from enterprise and government customers. Motorola
Solutions also authorized the initiation of a quarterly dividend
and a stock-repurchase program.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
(Nathalie Tadena contributed to this report.)
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