Motorola profits nosedive for Q3

18-10-2006

by Ciara O'Brien

Motorola saw its profits plunge 45 percent during the third quarter, as mobile phone sales failed to live up to expectations.

Net profit for the quarter reached USD968 million, translating into USD0.39 per share --45 percent lower than a year ago. Teamed with a 10 percent drop in operating earnings, it was a disappointing set of results that reversed some of the gains made in the second quarter.

In the three months to the end of March 2006 profits slipped 1 percent, a trend that was reversed in the second quarter with record sales of USD10.88 billion, up 29 percent from the USD8.41 billion posted a year ago.

Although third-quarter revenue increased by 17 percent to USD10.6 billion, this failed to meet analysts' expectations. They had predicted revenues around the USD11.06 billion mark.

Disappointing sales of high-speed wireless phones in Europe have hit the company hard, and although the mobile manufacturer shipped a total of 53.7 million mobile phones during the quarter -- an increase of 39 percent from the same period a year before -- this figure still fell short of the expected 55 million units.

However the company's executives were putting a brave face on the results, insisting that they were pleased with earnings.

"While our third-quarter sales were slightly below our guidance, we are pleased with our earnings. Each of our business segments and [in] total Motorola improved operating margin versus the second quarter of 2006, excluding highlighted items. Mobile Devices again achieved record unit shipments and sequentially improved its market share versus the second quarter," said Ed Zander, chairman and chief executive of Motorola.

"During the quarter, GSM infrastructure sales in the Europe, Middle East and Africa region were weaker than anticipated due to customer delays in capital spending. Additionally, sales of iDEN mobile devices were lower, caused by customer inventory reductions in anticipation of new dual-mode device shipments in the fourth quarter."

Motorola is currently the number two handset manufacturer; beaten to first place by rival Nokia. The manufacturer has steadily increased its market share in recent quarters, growing it from about 14 percent in 2004 to some 22 percent currently. The success has been partly attributed to the new Razr phones, which are appealing to the fashion conscious consumer. However, increased competition from equally stylish handsets may slow this growth, or even stop it in its tracks.