Motorola CEO: Targeting Top Handset Maker Nokia
NEW YORK -(Dow Jones)- After strengthening its number-two position in handsets, Motorola Inc. (MOT) is setting its sights on the top player, Nokia Corp. (NOK), said Chairman and Chief Executive Ed Zander.
Motorola is laying out its strategy with the goal of overtaking Nokia, Zander said, according to a transcript of a late Tuesday conference call to discuss the company's second-quarter results.
Motorola's mobile division "knocked the cover off the ball" with handset sales, Zander said. The company shipped nearly 34 million cell phones, a quarterly record for the company.
The Schaumburg, Ill., communications equipment maker reported second-quarter net income of $933 million, or 37 cents a share, reversing a loss of $203 million, or 8 cents a share, from a year ago.
Motorola's current results were aided by 12 cents a share in one-time items, while the year-earlier results were weighed down by a per-share loss of 33 cents related to its spin off of FreeScale Semiconductor Inc. (FSL), in addition to a own one-time gain of 8 cents a share.
Revenue, meanwhile, rose 17% to $8.83 billion from $7.54 billion last year.
Zander believes growth opportunity remains, and he expects gross margins to continue to rise.
Second-quarter margins fell to 32.6% from 34.5% from a year ago. Chief Financial Officer David W. Devonshire said the margins were down because of newly launched products that hadn't shipped in volume.
Motorola also forecasted third-quarter sales to be between $8.9 billion and $9.1 billion. Earnings from continuing operations are expected to be 27 cents to 29 cents a share.
On average, analysts were expecting earnings of 25 cents a share, and revenue of $8.58 billion.
Overall, the handset market looks healthy, CEO Zander said. He added that the company will likely introduce phones with higher price points in the second half and next year.
Ron Garriques, who heads up the company's mobile devices business said he sees multiple iconic products, not just the single RAZR phone, in the third and fourth quarters.
"That's how I see operating earnings expanding in the second half," he said.
While Motorola holds a strong position with phones using the GSM wireless standard, it remains weak with a rival standard, CDMA. Garriques said Motorola said "its product roadmap for CDMA hasn't been strong."
In the U.S., Verizon Wireless and Sprint Corp. (FON) use CDMA technology. Garriques said Motorola has made some in-roads with a Verizon phone that uses next generation technology, and he expects more changes in the second half.
In addition to the growing handset market, he sees opportunity in laying out infrastructure and cell phones for the third generation and fourth generation networks. He expects the mobile business to show year-over-year growth in operating earnings and revenue.
In the other segments, networks, government and enterprise mobility, and connected home systems, Zander also expects operating earnings and revenue growth.
Zander also noted the company is working with Verizon Communications (VZ) to help build out the fiber network and Internet-based video services.
The company's automotive electronics business continues to be weak, but improved over the first quarter. It returned to profitability due to steps taken in the first quarter to cut expenses, Zander said.
While the networks segment grew overall, there was some weakness in China. The company believes it's a result of hesitation in spending until China doles out its 3G licenses.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 20th July 2005