Earnings: Motorola Handset Sales Down A Third In 2007, No Short Term Fix

1 Comment

Motorola (NYSE: MOT) has released its financial results for the fourth quarter of 2007, and the full year of 2007. For Q407, Motorola had sales of $9.65 billion (down 18.2 percent year on year) and operating cash flow of $470 million. Net earnings was $100 million. The mobile devices segment saw sales of $4.8 billion, down 38 percent compared to the fourth quarter of 2006 — the fall of Motorola’s sales and net income were due to the fall in the mobile business. The operating loss was $388 million, compared with operating earnings of $341 million in the year-ago quarter. During the quarter Motorola shipped 40.9 million handsets. Motorola’s estimated marketshare was 12.4 percent, and 53 percent of its sales were in North America. In the call Motorola said that it expects a further decline in both revenue and unit sales in the first quarter of 2008, over and above the normal seasonal decline, and they expect to lose marketshare again in Q1.

For the full year 2007 Motorola saw sales of $36.6 billion (down 15 percent year-on-year) with a net earnings loss of $49 million. For mobile devices the full year sales were $19.0 billion (33 percent lower than 2006) and the segment incurred an operating loss of $1.2 billion, compared to operating earnings of $2.7 billion in 2006. The company ended the year with a net cash position of $4.3 billion.

In the conference call Greg Brown, Motorola CEO, said “our consistency in new products innovation is still not where it needs to be” and that he would focus on “aggressively rationalizing” Motorola’s cost structure with particular emphasis on mobile devices, and would be intent on transitioning to software and silicon with lower cost. Which takes care of the margins…he’ll also focus on expanding Motorola’s 3G product line. As people in the industry know, it takes time for any improvement (or deterioration) of the handset development business to make its way into the marketplace and from their to the earnings report, and on top of that Brown said that “recovery of mobile devices will take longer than expected“, and he was working hard on changing that.

New Handsets Required: The comment that a “product portfolio refresh is the most important thing we can do in terms of mobile handsets” gives a good indication that Motorola realises what it needs to do to improve its business, and it recognizes that demand slowed for Motorola’s new products as well as its old. Brown pointed out that even though the Rokr E8 was recognized as best of show at CES, “it’s one product, we need more than that”. New entrants to the mobile handset business such as Apple (NSDQ: AAPL) can be pleased with the success of a single device, but for a major incumbent variety is required to maintain marketshare. A question was asked about improving the design of the handsets, and Brown said Motorola has a good design team and good design in its handsets, and it was the software, user interface and services that go with the handset that needs to be improved. Tom Meredith”, acting CFO of Motorola, said that Motorola had embedded its 6,000 engineers into its seperate business segments.

Earnings Release

1 Comment

Michael Molin

Motorola Cell PC – I suggested this solution almost two months ago (not only on Intel Software Network where the home of my project is and even in BusinessWeek's "Innovation Predictions for 2008" and the NY Times Bits blog's comments of readers). Please pass this message to Greg Brown.

Comments are closed.