Motorola has posted disappointing Q1 results, despite rising handset sales. The company reported first quarter sales of just over US$10 billion - up on the US$8.2 billion a year earlier. However, net profits fell from US$692 million to US$686 million despite the sharp rise in sales.
Mobile Devices Segment sales were US$6.4 billion, up 45% compared with the year-ago quarter. Operating earnings increased to US$702 million, compared with operating earnings of US$440 million in the year-ago quarter. The company shipped 46.1 million units, up 61% compared to the first quarter of 2005 -- and up 3% compared to 44.7 million handsets shipped during Q4 2005.
Networks Segment sales were US$1.43 billion, down 14% compared with the year-ago quarter. Operating earnings were US$132 million, down compared with operating earnings of US$234 million in the year-ago quarter, due to the decrease in sales and restructuring charges of US$21 million in the first quarter of 2006.
The company's outlook for the second quarter of 2006 is for sales of between $10.3 billion and $10.5 billion.
Despite substantial growth in shipments of thin phones, ASPs declined from $146 to $139 and operating margins only grew marginally. Merrill Lynch noted this leading them to make three conclusions: 1) RAZR is cannibalizing mid-range phones and/or 2) RAZR is heavily discounted, and 3) Investment in emerging market channels hurts margins.
Merrill Lynch also said that they are concerned with Motorola's inability to grow margins in a meaningful way, despite great momentum in both the 7-quarter old RAZR and the new SLVR and PEBL handsets. They are concerned with margin deterioration once RAZR starts its (natural) descent and with further long-term deterioration in the Networks and Connected Home divisions."
Posted to the site on 20th April 2006
Posted to: www.cellular-news.com/story/17047.php