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Motorola Inc. stock plummets despite fourth quarter profit

by Alexa Harrison
Jan 28, 2010

Motorola Inc.’s stock plunged 12 percent on Thursday despite the company's posting sharply improved fourth quarter profit on continued cost cutting and improved operations of its Mobile Devices business.

In the quarter ended Dec. 31 Motorola swung to a profit of $143 million, or 6 cents per diluted share, from a loss of $3.7 billion, or $1.61 per diluted share, in the year-ago quarter.

Wall Street's consensus estimate was 8 cents per diluted share, according to Zacks Investment Research.

The company’s GAAP earnings per share included non-cash expenses for amortization of intangibles and stock-based compensation totaling 4 cents per diluted share.

Revenues decreased 19.8 percent to $5.7 billion from $7.1 billion in the year-ago quarter.

“As market growth returns, we are well positioned to take advantage of our investments in key global markets with a competitive cost structure,” said Greg Brown, Motorola co-chief executive officer and CEO of Broadband Mobility Solutions, in a statement.

The co-chief executive officer and CEO of Mobile Devices, Sanjay K. Jha, said in a conference call, “In 2009, we reduced our overall cost structure by over $1.9 billion with $1.5 billion coming in Mobile Devices. As we head into 2010, our markets remain extremely competitive but offer opportunities for growth.” Mobile Devices is the company's largest segment, and Jha reiterated that it plans to release at least 20 new mobile handsets this year. Among these will be smartphones whose anticipated shipments will total between 11 million and 14 million units, Jha said.

Motorola projects first quarter earnings per share to range from a loss of 1 cent per diluted share to 3 cents per diluted share, compared with a loss of 9 cents per diluted share in the year-ago quarter. Analysts forecast earnings of 3 cents per diluted share.

The first quarter outlook "was disappointing,” said Matthew Thornton, analyst for Avian Securities LLC. “I think the outlook reflects a very cautious outlook based on economic conditions and seasonality.”

“Mobile devices will continue to shrink their losses,” Thornton said. “I think that's the big swing factor in the evaluation of this company. The other two companies are able to run on their own. They're profitable and well-positioned." Motorola's other two businesses are Broadband Mobility Solutions and Home and Networks Mobility.

For the year ended Dec. 31, Motorola’s net loss was $51 million, or 2 cents per diluted share, compared with a net loss of $4.2 billion, or $1.87 per diluted share, for the year prior. Net revenue was $22 billion, a 27 percent decrease from $30.1 billion.

Motorola’s stock closed at $6.48, down 92 cents.