Motorola warns of Q4 shortfall
Motorola said its sales estimates for the fourth quarter of 2011 are below expectations as it deals with patent legal woes and increased competition.
Ongoing legal battles over patents and tough competition are hurting Motorola's sales and profits, the company said Friday.
After the market closed on Friday, the company reported that sales fell short of expectations in the fourth quarter of 2011. The company estimates sales of about $3.4 billion for the quarter with modest profitability on a non-GAAP basis. Analysts had expected the company to bring in sales of $3.9 billion, according to Reuters.
Motorola blamed increased competition in the mobile device market as well as raging patent wars, primarily with Apple. The company also said it shipped about 10.5 million mobile devices in the quarter, of which about 5.3 million were smartphones.
Motorola will offer more detail about the quarter when it releases its full earnings report on January 26.
Motorola, which uses the Google Android operating system for its smartphones, sued Apple in October 2010, accusing it of violating 18 separate patents by including Motorola technology in its iPad, iPhone, iPod Touch, and certain Mac computers. Apple fired back almost immediately with two lawsuits of its own against Motorola. Apple said Motorola is violating its patents for multitouch by including the feature in several of its Droid smartphones and other handsets.
The two companies have been going back and forth in the U.S. courts as well as in courts outside the U.S. over intellectual property issues.
Motorola, which has been around for more than 80 years, has a strong patent portfolio. And it's believed that the patent portfolio alone could have been what sparked Google's interest in acquiring Motorola. Google announced in August that it plans to buy Motorola for $12.5 billion. The deal is still awaiting regulatory approval. Motorola has a portfolio of more than 17,000 approved patents, with another 7,500 patents filed and pending approval.
Despite the fact that Motorola has an enviable patent portfolio, defending those patents has not been cheap. And it looks like the cost of its legal wranglings is taking a toll on the company.
Meanwhile, Motorola is facing stiff competition from other smartphone competitors, such as Samsung and LG. According to market research firm ComScore, Samsung accounted for 25.6 percent of U.S. mobile subscribers for the three months ending November 11, a slight increase of 0.3 percent over the previous three months. Motorola accounted for about 13.7 percent, which is slightly down from 14 percent for the three months that ended in August.
Updated 3:05 p.m. PT: This story has been updated with background information.