Motorola holds its ground in second quarter

Motorola Mobility slightly beat analyst expectations when it reported second-quarter earnings as it competes in the ultracompetitive mobile phone market.

Motorola Mobility stood its ground in the second quarter of 2011 in the ultracompetitive mobile market, reporting quarterly results slightly ahead of expectations.

The company today beat analyst expectations by reporting earnings of 9 cents per share for the quarter on revenue of $3.3 billion. Analysts had expected the company to report earnings of 6 cents a share on revenue of $3.12 billion, according to Thomson Reuters.

The company hit analyst expectations in terms of the number of smartphones it sold for the quarter. In total, Motorola shipped 11 million mobile devices, including 4.4 million smartphones. And it managed to sell slightly more Xoom tablets than expected. Motorola reported that it shipped 440,000 Xooms in the second quarter. This is still a far cry from the 4.69 million iPads Apple reported selling in the second quarter, but still better than the 300,000 Xooms that analysts had predicted Motorola would ship.

In an interview with CNET, CEO Sanjay Jha attributed the stronger results to better-than-expected results with its smartphones and tablets, stronger international expansion and an improved home business for the company's financial improvement in the second quarter.

The company's mobile phone sales were boosted by sales in China and Latin America. Nokia, which has seen its market share erode around the world, slipped in the second quarter in China. Motorola likely picked up some of that business.

Jha acknowledged that Motorola faced some challenges earlier in the year, including a delay in the Droid Bionic, and the 4G LTE option for its Xoom tablet. But Jha said he is looking for a strong fourth quarter.

"We feel well positioned to compete," he said in an interview with CNET.

Motorola faces stiff competition from Apple, which sold about 20.3 million iPhones in the second quarter. Asian handset makers Samsung and HTC also are giving Motorola a run for its money, especially at U.S. carrier Verizon Wireless. In fact, Samsung, which reports earnings later this week, is expected to become the leader in smartphone sales around the world.

But Jha said that he is confident Motorola will continue to be a strong competitor.

"There's market enough for us to compete and do well," he told CNET. "We have a reasonable understanding of the competitive landscape."

Much of Motorola's comeback in the smartphone market in 2010 was directly attributable to Verizon Wireless, which used its Droid line of Google Android smartphones to combat AT&T's exclusive grip on the iPhone. But with the launch of the iPhone on Verizon earlier this year, Motorola has lost a key marketer of its products. And now it must share marketing power and shelf space at Verizon with Apple.

But Jha said that the impact from Verizon getting the iPhone was "pretty much according to plan." And he added that Motorola isn't backing away from product launches in the third quarter, when the next iPhone is expected to launch.

Still, analysts say that Motorola's sales have taken a hit at Verizon. Tim Long, an analyst at BMO Capital Markets said in a recent research note that Motorola's smartphone share at Verizon has fallen off a cliff, dipping to 18 percent of smartphone sales at Verizon in the first quarter of 2011. A year ago it accounted for 38 percent of smartphone sales.

Motorola has been expanding its carrier relationships in the U.S. to get its devices to more subscribers. It announced a strategic relationship with Sprint Nextel , the third largest wireless operator in the U.S. behind AT&T and Verizon. It plans to launch 10 devices in 2011 for Sprint's network, including the Motorola Photon 4G, the business-oriented Motorola XPRT, and a low-end device for Sprint's prepaid brand Virgin Mobile.

It's also been selling the Atrix 4G, another business oriented device, on AT&T's network. And it added two new Droids to the Verizon suite of products. But the company has been slow to introduce a new 4G LTE device on Verizon's network. The Droid Bionic, which was announced in January at the Consumer Electronics Show , was expected this summer, but the company had not provided a firm date for the launch of the product. During the company's conference call CEO Sanjay Jha said the Bionic will be ready in September.

Motorola has also entered the crowded tablet market with the Xoom . For the most part, the tablet has been a bit of a disappointment in terms of sales. Introduced earlier this year, the Xoom has had a hard time competing against the popular Apple iPad. But after the company reduced the pricing of the Android tablet, the company began selling more. As a result, the company managed to beat analyst expectations in terms of shipments of the device. The Xoom will also be upgraded to support 4G LTE connectivity in September.

Motorola had a strong showing in the second quarter, the company said it expects to just about break even in the third quarter. But it does expect to do much better in the fourth quarter. Jha told CNET he knew investors would be disappointed in the third-quarter forecast, which is below consensus expectations. But he expects a much stronger fourth quarter.

In addition to the much-delayed Droid Bionic due in September, Jha said the company will release at least one more 4G LTE smartphone this year and two more Android tablets.

Updated 2:56 p.m. PT: Updated with background and information from a CNET interview with CEO Sanjay Jha as well as comments from the company's conference call.

 

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