Motorola's sluggish quarter dampens comeback hopes

Motorola reiterated its hopes for a turnaround pinned on the back of Google's Android smartphone platform, but the company's drooping handset sales and market share in the fourth quarter offered another reminder that the firm has not yet hit its stride.

As a result, investors sent the company's stock down more than 10 percent in the hours following the news, to around $6.60 per share.

On a companywide basis, Motorola reported net income of $142 million in the quarter, a reversal of the $3.6 billion net loss the company posted in the year-ago quarter. However, the firm's mobile devices division suffered from a drop in sales, despite the introduction of new high-end Android devices such as the Droid and Cliq during the period. Handset sales were $1.8 billion, down 22 percent from $2.35 billion in the fourth quarter of 2008. Motorola said it deferred $200 million in smartphone revenue because of accounting rules, but beginning in the first quarter accounting changes will require the company to defer only a portion of revenues. The unit's operating loss narrowed to $132 million, down from $595 million in the year-ago quarter.

Motorola shipped 12 million units in the quarter, including 2 million smartphones, down from 19.2 million from the year-ago period. The average selling price for Motorola's phones was up to $169, according to Motorola co-CEO Sanjay Jha, from $124 in the third quarter. However, Motorola's global handset market share dropped to 3.7 percent, down from 4.7 percent in the third quarter and 6.5 percent in the fourth quarter of 2008.

"We are just at the beginning stage of our transition to a smartphone company, and we have a lot of work ahead of us," Jha said on the company's earnings conference call.

Jha warned that Motorola's sales in the first quarter would be weaker than in its fourth quarter, but said the company would ramp up shipments throughout the year. He said Motorola expects smartphone shipments of between 11 million and 14 million units this year, with volumes weighted to the second half of the year. Jha reiterated Motorola's plans to ship 20 different smartphones this year, with the majority of them running the company's MotoBLUR user interface.

Additionally, Jha promised Motorola's handset division will be profitable by the fourth quarter of 2010.

During the company's call, Jha also commented on Motorola's decision to allow customers in China to use other search engines besides Google, and the company's plan to open its own Android application storefront. "We have taken steps to make sure that our business will continue unaffected to the best way we can," he said.

Google recently postponed the launch of Android phones from Motorola and Samsung in China following what the company said were cyber attacks there, possibly directed by the country's government. The action forced Motorola to push forward in China without Google's aid.

For more:
- see this release
- see this Bloomberg article
- see this Q4 earnings page

Related Articles:
Motorola shifts gears in China, Lenovo stands firm
Moto shows off newest Android phone: Backflip
Motorola remains firm on spinning off handset division
Sale of Motorola unit could have implications for handset division
Motorola makes strides in Q3, posts $12M profit

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