Motorola's handset unit rings up Q3 profit

Motorola (NYSE:MOT) reported strong results in the third quarter, and the company's handset unit posted its first operating profit in more than three years. Motorola's Android smartphone sales beat Wall Street expectations, and the company said it remains on track to split into two publicly traded companies in the first quarter.

Click here for key slides from Motorola’s earnings presentation.The handset vendor posted net profit of $109 million, up from $12 million in the year-ago period. Motorola's revenue jumped 13 percent in the quarter to $4.9 billion, the company's first year-over- year revenue increase since the fourth quarter of 2006. Motorola excluded its wireless network business from its third-quarter earnings; Nokia Siemens Networks agreed in July to buy the unit for $1.2 billion and the deal is expected to close in early 2011. If Motorola had included the networks business, its profit would have been $380 million.

Motorola's mobile devices unit reported a non-GAAP operating profit of $3 million in the quarter, compared with an operating loss of $183 million in the year-ago period. The unit's sales rose 20 percent to $2 billion in the quarter. Motorola shipped 9.1 million handsets in the quarter, including smartphone shipments of 3.8 million devices running Google's Android platform--higher than analysts' estimates of around 3.57 million units, according to Reuters.

Motorola co-CEO Sanjay Jha said during the company's earnings conference call that the firm now expects to end the year at the high end of its guidance of 12 million to 14 million smartphone unit shipments. He said Motorola will focus on mid-range Android phones in the quarter, and that fourth-quarter operating profit and sales will be higher sequentially. He also said Motorola will focus on enterprise users as well; the company recently introduced its enterprise-focused Droid Pro handset at Verizon Wireless (NYSE:VZ).  

Jha said he was very pleased the handset unit reached profitability a quarter ahead of when he had expected. He also said that Motorola has 3 million MotoBLUR users--MotoBLUR is the vendor's software layer atop Android. He also said he thinks Google believes the Android ecosystem benefits from a diversity of user experiences, and that he has had no indication that future versions of Android will curtail Motorola's ability to use MotoBLUR.

When asked about speculation that Verizon will start selling Apple's (NASDAQ:AAPL) iPhone in the first quarter, Jha said Motorola expects to "continue a very meaningful relationship with Verizon," and that Verizon will continue to invest in the Droid franchise, of which Motorola is a significant part. However, he also said that Motorola will diversify its portfolio within the United States with other operators will focus on diversifying its portfolio in other foreign markets.

Jha also touched on the tablet market, which Motorola is expected to enter in early 2011. He said he is not sure if Gingerbread--the reported next version of Android--is the right platform for tablets. However, he said Motorola has proven that it can differentiate on top of Android, and that Motorola is well-positioned for entering the tablet market.

For more:

- see this release
- see these slides from Motorola's earnings presentation
- see this Bloomberg article
- see this Dow Jones Newswires article (sub. req.)
- see this Reuters article
- see this BusinessInsider article
- see this FierceWireless Q3 earnings page

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