Motorola posts surprise profit

Company reports an unexpected first-quarter profit as its turnaround strategy starts to show results.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
2 min read

Motorola's strategy may be starting to pay off as the company announced a surprise profit and topped forecasts for the first quarter.

On Thursday, the company said it earned $69 million, or 3 cents per share, in the quarter. During the same quarter a year ago, it lost $231 million, or 13 cents per share. Analysts had expected Motorola to lose 1 cent to 3 cents a share in the first quarter.

Revenue was down 6.1 percent to $5.04 billion from a year ago. Analysts expected revenue of about $5.1 billion.

Motorola sees the earnings momentum continuing and said it expects to earn 7 cents to 9 cents per share in the current quarter. Analysts have been predicting 3 cents per share.

The handset maker has been trying to turn around its business for the past couple of years. Ever since its Razr phone commanded consumer attention, Motorola has had a hard time finding a new hit. The company has been shifting its strategy and has started focusing more on smartphones, such as the Droid, which features the Google Android OS and is sold through Verizon Wireless.

Motorola sold 2.3 million smartphones in the first quarter. Previously, it had said that it would sell fewer than 2 million such phones. The smartphone focus, in addition to stronger sales in non-phone products, helped lift the company to profitability.

That said, Motorola's new strategy has resulted in fewer phone sales overall. In fact, in the first quarter, the company ceded its title as the largest maker of cell phones to Apple. Motorola sold a total of 8.5 million phones in the quarter. Apple sold 8.8 million iPhones.

When the Razr was in its heyday four years ago, Motorola sold 46.1 million phones in the first quarter, the Associated Press reported.

While the sales volume is lower, the company can charge more for its higher-end handsets. But the price difference isn't enough to offset the losses in revenue--at least not yet.

Motorola plans to introduce 20 new Android smartphones by the end of 2010. It has already introduced eight, including the Cliq, Droid, and Backflip.