As losses return, Motorola delays its split
The struggling company announces a third-quarter loss and delays the planned spinoff of its mobile-handset business amid macroeconomic woes.
Motorola's profits from last quarter were short-lived, as the company once again reports losses for the third quarter.
And as the economy worsens, the company also said it will delay its split of the company in two.
On Thursday, Motorola reported a net loss of $397 million, or 18 cents a share. This is compared to a profit of about $60 million, or 3 cents a share, during the same quarter last year. Part of the loss is attributed to a net charge of 23 cents a share for restructuring the company.
Revenues for the quarter were down about 15 percent, to $7.48 billion. Motorola's struggling mobile-handset division continued to be a drag on the company. Handset shipments for the company were down about 32 percent during the quarter, to 25.4 million units.
As a result, the division reported a loss of $840 million, as sales declined 31 percent. The loss also included the restructuring charges.
The losses were in stark contrast to the surprise profits that Motorola reported for the second quarter of 2008. Through a series of cost-cutting measures, the company was able to post a profit of $4 million, or less than 1 cent a share, for the second quarter. But it appears that the positive results were short-lived.
In addition to cost cutting, Motorola is now trying to restructure itself to get back on track. In August, the company hired former Qualcomm executive Sanjay Jha to take over the new cell phone division.
Since coming on board, Jha has launched an initiative to reduce the number of operating systems that the company uses in its handsets. And he recently revealed company plans to use Google's Android operating system to power its midrange cell phones as of next year's holiday season.
As Motorola works through its internal structural problems, the economy has been worsening. And Jha said the company will delay splitting off its wireless business into a separate company.
The split, which was announced earlier this year, was expected to take place during the third quarter of 2009. The executive cited the declining economy as the major reason for the delay.
No revised timeline was given. That said, Motorola still expects to roll out the spinoff eventually. One company will handle all of Motorola's home and networks mobility businesses. And the other will be run the troubled handset business.
Motorola also revised its full-year earnings estimates. It now expects to see 2008 earnings of about 5 cents to 7 cents a share. This is about a penny lower from projections at the end of the second quarter.
Motorola has a tough road ahead of it. Not only is it facing stiff competition from handset market newcomers such as Apple, with its iPhone. But the company is trying to stage a turnaround just as consumer spending worldwide is expected to tighten.
The fact that cell phone penetration is more than 85 percent in the United States, Motorola's most significant market, doesn't help matters much, either.