Motorola earnings jump despite lower sales
A surprising net gain in income, which hit $26 million, brightens the company's second quarter. Looking ahead, Motorola expects a boost from new Android phones.
Amid markedly lower sales and sluggish demand for its cell phones, Motorola saw a dramatic boost in earnings for the second quarter.
The company on Thursday reported net profit of $26 million, or 1 cent a share, for the quarter ended July 4, compared with $4 million for 2008's second quarter.
The jump in earnings surprised analysts, who had expected a loss of 4 cents a share, and Motorola itself, which had forecast a loss of 3 cents to 5 cents per share.
Quarterly sales fell to $5.5 billion, a drop of 32 percent from $8.1 billion a year ago. Analysts had been eyeing sales of $5.6 billion.
Ih the coming months, Motorola is hoping to make a dent in the smartphone market. "We have agreements in place with carriers and remain on track to bring our new smartphone devices to market for the holiday selling season," Sanjay Jha, co-CEO of Motorola and CEO of Mobile Devices, said in a statement. "We are also excited about our 2010 portfolio and are pleased with the customer feedback."
ZDNet's Larry Dignan noted the company's expectation of good results from tapping Google's Android software, which, Jha said, "will get us back in the game in smartphones."
"We will have two Android devices (for the holidays in the U.S.)," said Jha, adding that deals are already in place with two major carriers with more to follow. "We also have plans for more devices in the first quarter of 2010."
Facing a competitive cell phone market and the lack of exciting new products, the company has been struggling over the past couple of years. Motorola's popular Razr was unveiled in 2004. Since then, the company has failed to come up with a device hot enough to compete effectively with smartphones from companies such as iPhone maker Apple.
During the second quarter, Motorola said it sold 14.8 million mobile phones, up slightly from 14.7 million in the first quarter but down from the 28 million units it sold a year earlier. Second-quarter sales for the mobile device division plummeted 45 percent to $1.8 billion.
To stay afloat, the company has been on a cost-cutting frenzy since last year, which contributed to the quarterly earnings gain.
In December, Motorola said it would trim compensation packages for all employees. Then in January, it announced staff layoffs of 4,000, around 6 percent of its entire workforce.
For the third quarter, Motorola is expecting anywhere from a loss of 1 cent per share to a gain of 1 cent per share. "We will further improve earnings in the second half of the year," said Jha on a conference call to announce the second-quarter results.